Unlike Luxembourg, financial supervisors in Belgium and the Netherlands see no need for a diligent review of fund valuation practices, spokespeople have told Investment Officer. In Ireland, meanwhile, the supervisor is preparing a “broader industry communication” on the valuation of funds that will be published in the coming months.
A European sample pulled in the context of a common supervisory assessment by the European financial markets authority Esma has found shortcomings in several EU countries in the way investment funds calculate their asset values. Esma however has declined to name these countries where a need for additional actions was detected.
“The FSMA has also conducted an investigation in Belgium into the valuation of fund assets as part of this CSA,” said a spokesperson for Brussels-based supervisor FSMA. “This investigation has not led to the need to publish certain comments or expectations towards the sector in Belgium.”
In Amsterdam, a spokesman for the Dutch AFM also said they see no need for subsequent steps at this time. “The AFM sees no reason for this at the moment,” he said.
‘Industry communication’
In Ireland, like Luxembourg a major investment funds hub in Europe, the financial supervisor - the Central Bank of Ireland - is preparing an industry message on fund valuation methods that will be released in the coming months.
“As part of the CSA, the Central Bank of Ireland undertook a planned programme of engagement with relevant firms, which included a number of on-site inspections,” it said in response to a question by Investment Officer. “Asset Valuation is a key area of focus for the Central Bank and as with previous CSAs, the Central Bank of Ireland will issue a broader industry communication on our findings in the coming months.”
Luxembourg’s financial watchdog, the Commission de Surveillance du Secteur Financier (CSSF), last month published what it calls a “feedback report” in which it reacts to the outcome of the Esma probe and the CSA. In the report, CSSF ordered the fund sector to thoroughly examine valuation practices for investment funds and to make necessary improvements by the end of this year.
Clearer and more comprehensive
In Luxembourg, the CSSF and Esma now expect clearer and more comprehensive valuation policies and procedures. According to one specialist involved in valuation, existing regulations are often too general, and there is a lack of regular reporting and follow-up checks.
The guidelines are regarded as particularly challenging for relatively small financial service providers licensed as Alternative Investment Fund Managers, or AIFMs. The rules can be especially complicated for them to interpret. Larger AIFMs tend to be better equipped and have allocated more resources to valuation procedures.
The CSSF‘s order applies to all Ucits and alternative AIF funds in Luxembourg but will mainly stir things up among managers of alternative investment funds. Luxembourg is home to about 14,000 alternative funds. This part of Luxembourg’s investment sector has experienced strong growth in recent years and now represents about a third of the 5,000 billion euros in funds in the Grand Duchy.