New Zealand Financial Markets Authority identifies gaps in related party and fair value disclosures by managed investment schemes

The New Zealand Financial Markets Authority has published findings from a thematic review of related party disclosures by 61 managed investment scheme managers and selected schemes. Most entities identified expected related party relationships and transactions, but disclosures often lacked enough entity-specific information for users to understand their nature, financial effects and associated conflicts of interest. Manager financial statements were generally less complete than scheme statements, particularly for management fees. The review also found insufficient transparency where schemes invested through related party funds, including around underlying exposures, multiple layers of fees and the basis of valuation. Entities frequently treated net asset value as fair value and Level 2 classification as automatic without explaining valuation timing, market conditions, observability of inputs or potential adjustments. Managers and schemes should strengthen disclosures on related party structures, fee rates and offsets, investment chains, valuation techniques and fair value hierarchy judgments.