FCA reports on private market valuation processes

The FCA has published the results of its review of private market valuation processes. It is imperative that firms in these markets have robust processes given that the regular price discovery present in more liquid markets is not available in the private markets.

The review looked at how firms are valuing private equity, venture capital, private debt and infrastructure assets, and how strong their governance procedures are. Its key findings were:

• good practice in:
  • investor reporting;
  • process documentation;
  • use of third party valuation advisers; and
  • consistent application of valuation methodologies
• need for improvement in:
  • better identification and documentation of potential conflicts of interest in the valuation process; and
  • increased independence within the process.

The FCA will use its findings in its AIFMD review.