UK FCA Releases Review of Private Market Valuation Processes for Private Equity, Venture Capital, Private Debt & Infrastructure Asset – 1) Firms Have Good Practices in Investor Reporting, Process Documentation, 3rd-Party Valuation Advisors & Consistently Applying Valuation Methodologies, 2) Areas of Improvements Include Need for Better Identification, Documentation of Potential Conflicts of Interest in Valuation Process, Increased Independence on Valuation Processes Within Firms & Ad-Hoc Valuations in Times of Market Disruption
6th March 2025 | Hong Kong
The UK Financial Conduct Authority (FCA) has released the review of private market valuation processes for private equity, venture capital, private debt & infrastructure asset –1) Firms have good practices in investor reporting, process documentation, 3rd-party valuation advisors & consistently applying valuation methodologies, 2) Areas of improvements include need for better identification, documentation of potential conflicts of interest in valuation process, increased independence on valuation processes within firms & ad-hoc valuations in times of market disruption. UK FCA (5/3/25): “The FCA’s review of private market valuation processes has found good practice but some room for improvement. Private markets have grown significantly in recent years with the UK continuing to be the largest centre for private market asset management in Europe. Private market assets don’t have the frequent trading and regular price discovery present in more liquid public markets, so robust valuation practices are important for fairness and confidence in private markets. The FCA recently completed a multi-firm assessment of valuation practices and governance for valuing private equity, venture capital, private debt, and infrastructure assets. Firms generally demonstrated good practice in areas such as investor reporting, process documentation and use of third-party valuation advisers, and were consistently applying valuation methodologies. However, the FCA found areas where firms need to improve. These included the need for better identification and documentation of potential conflicts of interest in the valuation process, and increased independence within firms’ own valuation processes. The FCA also found that some firms needed to enhance processes for ad hoc valuations in times of market disruption. Improvements in these areas are particularly important with growing retail investor exposure to private assets. The findings will be used in the FCA’s review of Alternative Investment Fund Managers Directive (AIFMD) as it updates its rules in the Handbook and will inform the FCA’s contribution to IOSCO’s review of global valuation standards to support the use of proportionate and consistent valuation standards globally in private markets.” Read the FCA’s review of private market valuation practices.
“ UK FCA Releases Review of Private Market Valuation Processes for Private Equity, Venture Capital, Private Debt & Infrastructure Asset – 1) Firms Have Good Practices in Investor Reporting, Process Documentation, 3rd-Party Valuation Advisors & Consistently Applying Valuation Methodologies, 2) Areas of Improvements Include Need for Better Identification, Documentation of Potential Conflicts of Interest in Valuation Process, Increased Independence on Valuation Processes Within Firms & Ad-Hoc Valuations in Times of Market Disruption “
Notes
- Read the FCA’s review of private market valuation practices.
- While the FCA did not independently validate firms’ fair value assessments, they selected valuation case studies to see how firms valued specific assets over time to understand the valuation process in practice.
- The review focused on private market assets using Level 3 inputs under IFRS 13 and ASC 820, which require significant judgement and impact investment decisions.
- The findings are relevant to UK firms and international stakeholders as global valuation standards continue to evolve.
UK FCA Releases Review of Private Market Valuation Processes for Private Equity, Venture Capital, Private Debt & Infrastructure Asset – 1) Firms Have Good Practices in Investor Reporting, Process Documentation, 3rd-Party Valuation Advisors & Consistently Applying Valuation Methodologies, 2) Areas of Improvements Include Need for Better Identification, Documentation of Potential Conflicts of Interest in Valuation Process, Increased Independence on Valuation Processes Within Firms & Ad-Hoc Valuations in Times of Market Disruption
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