This information paper sets out MAS’ supervisory expectations for effective governance structures, frameworks, policies and procedures, and controls with respect to valuation of funds’ assets. The paper provides examples of good practices and areas for improvements. Fund Management Companies (FMCs) can adopt a risk-based and proportionate approach, considering the size, scale and complexity of their business and the types of funds managed. Gaps identified should be promptly addressed through specific remediation/enhancement measures.
- Governance
- Valuation matters are overseen by senior management member(s) who are independent from portfolio management function to avoid potential conflicts of interest (COI). For smaller FMCs, where there could be a lack of independence in their governance structures, any potential COI should be adequately mitigated (eg. engage external valuers to conduct independent assessments or conduct regular external audits) and where appropriate, disclosed to their investors.
- Dedicated committee(s) has formal Terms of Reference (ToR) that clearly outline its responsibilities, composition, meeting frequency, quorum requirements, and reporting line(s) for proper accountability.
- Policies and Procedures (P&Ps)
- P&Ps to include roles and responsibilities, valuation methodologies and frequency, and escalation procedures. They are updated on a timely basis when there are changes to fund offerings, investment universe, valuation methodologies and operational processes, including exception tolerance levels. Triggers for ad-hoc reviews should be clearly specified for better management of operational risk.
- Clear and comprehensive guidance on exceptions handling to ensure consistent and timely treatment of any deviations from approved P&Ps, such as valuation methodologies. All such deviations should be adequately justified, properly documented and approved.
- Ongoing Price Validation Checks
- Ensure price validation checks are robust by considering areas such as Calibrating the frequency of stale price reports according to the dealing frequency, Adjust exception tolerance levels according to the characteristics of different asset classes and financial instruments, Detect inconsistent valuation practices for the same asset class or financial instrument across different funds managed, Review and follow-up on all pricing exceptions, Use independent alternative price sources to investigate exceptions, Escalation process and forum for exceptions handling, and Clear criteria or thresholds for challenging third-party service providers’ valuations.
- Maintain proper records of all price validation checks performed, investigations conducted, and follow-up actions taken to resolve pricing issues, including any approvals obtained.
- Valuation Approaches and Methodologies
- Objectively assess the recoverability of private credit, taking into consideration asset-specific and/or broader market events that materially impact the borrowers’ ability to repay and make the necessary fair value adjustments on a timely basis.
- Strengthen valuation governance framework by implementing robust, independent verification procedures to support fair value assessments. This includes validating key inputs and assumptions by cross-checking with independent data sources and benchmarking analyses.
- Regularly check for availability of market prices or changes in market inputs that may warrant a reassessment of the fair values assigned to securities subjected to fair value assessments.
- Ensure robust due diligence is conducted on third-party service providers, prior to their appointments and periodically after their appointments. This includes verifying their independence and expertise, evaluating their valuation methodologies and underlying assumptions, and ensuring adherence to agreed performance metrics.
- Ensure that all fair value assessments, approvals, and communications with third-party service providers are properly documented.
- Disclose to investors information on the third party valuation service providers, involvement of the FMC in the valuation process, description of valuation approach and methodology.
For the full details, refer to https://www.mas.gov.sg/publications/monographs-or-information-paper/2026/valuation-practices-for-fund-management-companies
Disclaimer: The information, views or opinions expressed are provided for general information and should not be relied upon as legal or professional advice.