UK regulator to commence assessment of private market valuations


The UK’s Financial Conduct Authority (FCA) is set to launch a comprehensive review of valuations in private markets amid concerns over the potential impact of higher borrowing costs on the sector. As global regulators grow increasingly worried about the risks in private assets and other markets following the reversal of low interest rates, the FCA’s exercise aims to assess the “disciplines and governance” over valuations. The review will examine how valuations are carried out, who is accountable, and the governance procedures in place within asset management firms. The FCA can require firms to make improvements if it finds governance processes to be inadequate.

Private assets such as real estate and unlisted shares and bonds are typically valued using models that respond slower to market conditions compared to listed assets. As a result, sharp market corrections may not be reflected in valuations for weeks or months. Fund managers in private markets have more discretion over valuations as their holdings are not subject to daily swings in public market sentiment. The FCA’s review, following a previous asset managers’ liquidity assessment, will focus on ensuring robust governance in valuations and calling out failures if necessary. The review is expected to begin later this year and will involve various types of asset management firms in the UK’s industry, which is regulated by the FCA.

In response to concerns about private markets, US regulators have ordered private funds to disclose more information about their performance and expenses. This initiative has led to a lawsuit from a coalition of private equity, venture capital, and hedge funds. The FCA’s review reflects the growing uneasiness among global regulators about potential risks in private assets and aims to address the complacency observed in the $13tn global private capital sector. By examining valuations and improving governance processes, the FCA seeks to mitigate risks and ensure a more resilient financial system in the face of future market challenges.

Source link

Share post:




More like this

In 2018, Microsoft attempted to sell Bing to Apple per Google files.

Recently unsealed court filings revealed detailed information about the...

Indian journalist Fazil Khan dies in Manhattan fire sparked by lithium battery.

A 27-year-old Indian journalist, Fazil Khan, tragically lost his...

Vending Machine Error Exposed Secret Face Recognition Technology in Just 10 Words

The University of Waterloo in Canada is currently facing...

Bitcoin ETFs attracting more investment than Gold ETFs, BTC to surpass Gold market cap?

The introduction of new Spot Bitcoin ETFs has led...