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ESMA launches a Common Supervisory Action on the valuation of UCITS and open-ended AIFs

  • Luxembourg
  • Financial services and markets regulation
  • Investment funds and asset management

02-03-2022

On 20 January 2022, the European Securities and Markets Authority (ESMA), launched the Common Supervisory Action (the “CSA”) on the valuation of UCITS and open-ended alternative investment funds (AIFs).  The CSA is the third in a series of supervisory actions ESMA launched in coordination with national competent authorities (the “NCAs”) across the European Union.  The first two focused on liquidity risk management and supervision of the costs and fees of UCITS.  The launch of the CSA follows statements made by ESMA in late 2021 which highlighted valuation of assets as an area of importance for the fund management industry.  As pointed out by ESMA, valuation risks pose a potential threat to the financial stability of the Member States and must be effectively addressed at the EU level.  

Common Supervisory Action

The CSA aims to assess compliance of supervised entities with valuation obligations under the UCITS Directive and AIFMD.  In particular, the evaluation will focus on authorised managers of UCITS and open-ended AIFs investing in less liquid assets such as unlisted equities, unrated bonds, corporate debt, real estate, high yield bonds, emerging markets, non-actively traded listed, or bank loans.  In the course of the year, using its common assessment framework, ESMA will cooperate with the NCAs to collect information on valuation methodologies, policies, and procedures applied by supervised entities.  In doing so, ESMA will also seek to ensure uniform supervision of valuation obligations by the NCAs across all Member States of the European Union. 

The CSA in Luxembourg

According to a Luxembourg Financial Supervisory Authority (“CSSF”) press release dated 24 January 2022  the first phase of the CSA will begin in March 2022.  Selected Luxembourg-based UCITS management companies and alternative investment funds managers will be asked to complete a dedicated questionnaire for all the UCITS and AIFs they manage.  The CSSF will communicate further details on the questionnaire and submission procedure in due course.

For more information and guidance on the valuation risks of UCITS and open-ended AIFs, please get in touch:

Jose Pascual, Managing Partner
Marta Gajos, Senior Associate
Ronald Paterson, Partner
Thomas Pritchard, Principal Associate Professional Support Lawyer

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