valuations

Valuation sits at the heart of Luxembourg’s private markets ecosystem, yet supervisors remain unconvinced that current practices are consistently robust. Speaking at an event organised by Kroll and the Association of the Luxembourg Fund Industry, the CSSF flagged shortcomings in the review and approval of valuation models at investment fund managers, underlining that governance, documentation and independent challenge still require closer attention as private assets continue to scale.

In a move to strengthen valuation practices across the investment fund industry, Luxembourg’s financial supervisor CSSF on Wednesday unveiled a glimpse of plans to revise its valuation guidelines for investment fund managers. The update is due in 2025.

Luxembourg’s financial regulator has issued a relatively small fine for a class of transgression with huge implications for the industry: valuations of funds, in particular for unlisted alternative investments.

Luxembourg’s financial watchdog, the CSSF, has made important changes to its rules for valuations of investment funds, the first in two decades. While many things stay the same, some key updates—like lowering limits for money market funds and adding new checks before making investment decisions—are aimed at tightening control and providing clearer guidance.

Luxembourg’s international status as a hub for alternative investments and private equity this year was reinforced as institutional investors sought stability as global equity and bond markets were taking a beating by surging inflation and rising interest rates.

Luxembourg has recently seen the launch of the Luxembourg Valuation Professionals Association, known as LVPA. Valuations are “extremely strategic for building trust with your investors,” said Hind El Gaidi, one of the LVPA’s co-founders. For this Luxembourg edition of the IO Talks podcast, El Gaidi spoke to Investment Officer together with three fellow co-founders: Christophe Vandendorpe, partner at EY; Rafaël Le Saux, director at PwC; and Antoine Boggini, co-founder at BHB & Partners, an independent advisory firm.

JP Morgan Asset Management looks at a globally diversified portfolio from different angles in order to achieve a better allocation. Global investing is a must. The source of equity returns is becoming less beta-driven. Active investing is now more appropriate, and themes can provide the necessary alpha. And the digital revolution continues unabated. 

Despite the profound economic shock that continues to play out, investors in private assets appear to be quietly confident that this is a major but temporary setback. Two players in Luxembourg’s financial sector share this cautious optimism as they see investors taking a long-term view.