UK Financial Conduct Authority reviews private capital valuations amid growing fears over the impact of higher borrowing costs


FCA, the UK’s financial regulator, is preparing to launch a sweeping review of valuations in private markets, amid growing fears over the impact of higher borrowing costs on the sector.

The FCA’s exercise will be looking at who within a firm is accountable for valuations, how information about those valuations is passed upwards to the relevant management committee and board and what other governance procedures are in place.

The exercise, to start by the end of year 2023, comes as global regulators grow increasingly uneasy about the potential for blowups in private assets and other markets following the abrupt reversal of more than a decade of low-interest rates.

Global securities regulator Iosco recently warned that the $13tn global private capital sector was too complacent about possible risks, highlighting valuations as one vulnerable area.

Private assets such as real estate and unlisted shares and bonds are often valued using models that are typically slower to respond to deteriorating market conditions than listed assets.

Assets are usually valued on a quarterly basis, meaning that a sharp market correction may not feed through to the valuations for weeks, if not months.

Fund managers who invest in private markets typically have greater discretion over the valuation of their own assets because their holdings are not subject to the daily swings of public market sentiment.

According to media, if the FCA does not feel that the governance processes are robust, it may call out failures. If a firm does not respond, it could be ordered to make improvements. There are about 2,600 firms in the UK’s £11tn asset management industry, with the FCA acting as their regulator. The firms include hedge funds, venture capital and private equity, as well as big institutional asset managers.

US regulators have responded to fears about private markets by ordering private funds to make more extensive disclosures about their performance, an initiative that has prompted a lawsuit from a coalition of private equity, venture capital and hedge funds.

September 2023

©2024 MNK CAPITAL MANAGEMENT LTD. All rights reserved | This website is under the operation of MNK CAPITAL MANAGEMENT LTD which is licensed by the Cyprus Securities and Exchange Commission (license No. AIFM 60/56/2013).

MNK CAPITAL MANAGEMENT LTD (“Company”) is authorized and regulated by the Cyprus Securities and Exchange Commission (“CySEC”) with authorization number AIFM  60/56/2013. The information contained on this website is provided for general information and does not constitute an offering or legal or other professional advice, nor does it constitute any form of personal recommendation. Accordingly, information on this website is merely intended to raise awareness of issues relating to the Company’s business and by accessing this information you shall be deemed to accept and agree to be bound by the terms of this notice. Information contained on this website is subject to change without notice. It is therefore advisable that the user reviews this Disclaimer and any other notices on this website on a regular basis so that the user is aware of any such amendments of modifications. The distribution of information contained within this website may be restricted in certain jurisdictions by law or regulation and, accordingly, parties who access it are required to inform themselves of any comply with any such restrictions that might apply. Parties interested in accepting any service detailed within this website should inform themselves as to: (i) the legal and regulatory requirements within their country of nationality, residence or domicile; (ii) the tax consequences which might be relevant to the Company’s fund management services; and (iii) any other requirement or restriction which they may encounter. Therefore, the use of any information of materials on this website is entirely at your own risk, for which we expressly exclude liability to the fullest extent permitted by law. It shall be your own responsibility to ensure that any services or information available through this website meet your specific local requirements and/or restrictions. The entire contents of are subject to copyright with all rights reserved. You may download or print individual sections of the site for your personal use and information only provided that you retain all copyright and other proprietary notices. You may not reproduce (in whole or in part), transmit (by electronic means or otherwise), modify, link into or use for any public or commercial purpose the site without the prior written permission of the Company. The information contained withing this website is of a general nature and further information should be sought by contacting us with your specific requirements. This website uses cookies. If you continue without changing your settings, we will assume that you are happy to receive all cookies on this website.