Ten fund managers were reviewed by the corporate regulator between 1 March and 1 November during the early stages of the COVID-19 pandemic to determine “whether the current regulatory settings for the valuation of illiquid assets are adequate to protect members’ interests in times of heightened market volatility”.
ASIC’s review, which examined how well responsible entities (REs) managed the challenges of illiquid asset valuation while meeting regulatory obligations, estimated that 2.5 million investors are likely to have been exposed to managed funds of the REs that were reviewed.
The review found that that the REs were “responsive to the increased valuation risks during the review period” and “continued to provide timely valuations of their illiquid assets, including by increasing the frequency of valuations, expanding the sources of information to benchmark valuations and assumptions”.
“Robust and timely valuation of assets, especially illiquid assets, is fundamental to managed funds being fair and efficient for their investors,” ASIC deputy chair Karen Chester said.
“Over 2.5 million investors can take comfort from our review findings. Namely, that even during the market volatility of 2020, we found the illiquid-asset valuation practices to be robust, timely and consistent with ASIC guidance and industry standards.
“Based on our review, we do not see any need to change our guidance on valuations for managed funds. We encourage the REs to closely review our findings specific to their practices, but also to look to the better practices of some fund managers we identified in our review.
“Investors, especially retail investors, will always rely on REs to remain vigilant and responsive to market fluctuations and to ensure their valuations are regular, robust and reflect the fair value of the assets.”
Neil Griffiths
Neil is the Deputy Editor of the wealth titles, including ifa and InvestorDaily.
Neil is also the host of the ifa show podcast.
