Financial Conduct Authority multi-firm review finds private market valuation practices broadly sound but highlights gaps on conflicts, independence and disruption-driven valuations

The Financial Conduct Authority published findings from a multi-firm review of private market valuation processes, concluding that firms generally demonstrate good practice but need to strengthen parts of their governance and control frameworks. The review covered valuation practices for private equity, venture capital, private debt and infrastructure assets, where limited trading and price discovery make robust valuation particularly important. Firms were typically consistent in applying valuation methodologies and showed good practice in investor reporting, process documentation and use of third-party valuation advisers. Areas for improvement included better identification and documentation of potential conflicts of interest in the valuation process, increased independence in firms’ own valuation processes, and enhanced approaches to ad hoc valuations during periods of market disruption. The FCA noted the importance of these improvements in the context of growing retail investor exposure to private assets; it also clarified that it did not independently validate firms’ fair value assessments, but used valuation case studies to assess how valuations were produced over time for selected assets. The findings will feed into the FCA’s review of the Alternative Investment Fund Managers Directive as it updates Handbook rules, and will also inform the FCA’s contribution to IOSCO’s review of global valuation standards for private markets.