LTAF valuation and pricing requirements

Valuation of assets: who values the assets of a LTAF

In general the assets of LTAFs must be valued either by:

• an appointed ‘external valuer’ or 
• the fund manager if certain conditions are satisfied. 

If the fund manager acts as the valuer:

• It must possess the knowledge, skills and experience to do so. If it does not do so, an external valuer must be used.
• The performance of valuing the LTAF’s assets must be functionally independent from portfolio management, any conflicts of interest, including around remuneration, must be mitigated and undue influence prevented. 
• The fund manager may appoint a qualified valuer to support its valuation. For an LTAF investing in property, it must appoint an independent valuer, with knowledge of and experience in valuing relevant properties.
• The LTAF’s depositary must assess, when the LTAF is set up and on at least an annual basis, whether the fund manager has the resources and procedures to value the LTAF’s assets.

There is no need for a fund manager to appoint an external valuer if the LTAF invests only in units or shares of other funds and an external valuer performs the valuation function for such funds.

Valuation of assets: when the LTAF must value its assets

• The LTAF’s assets must be valued each time the LTAF allows investors to deal in its units.
• If such dealing is less frequent than monthly, then the assets must also be valued monthly.
• Monthly valuations, even where they are not used for dealing units in the fund, should be an updated indicative valuation of the assets held in the scheme property. The valuation should, for example, take into account market and/or other events that change the valuation, and should give confidence that the valuation is accurate, fair and proper.

Valuation of assets: other requirements for LTAFs

• The assets must be valued at fair value. 
• Where a fund manager values the fund’s assets, valuations must be undertaken in line with good market practice. 
• The prospectus of the LTAF must describe the basis on which its assets are being valued. 
• The fund manager must make annual assessments of how the LTAF has been managed in the best interests of the LTAF and its investors. 
• The fund manager must provide a summary of its assessment to investors as part of its annual report.
• As part of this assessment, the fund manager must consider various factors including for example: 

- methodologies around the valuation of the fund
- management of conflicts of interest
- liquidity management. 

• There are regulations which set out detailed requirements around the policies and procedures that a fund manager must have in place to value an LTAF’s assets to ensure fair, transparent and appropriate valuation methods are used for each type of asset. 
• There are specific requirements where a fund manager values an asset using a model and where there are particular risks that an asset might not be appropriately valued. 
• The fund manager is required to apply valuation policies consistently across all funds it manages including LTAFs. 
• Valuation policies and procedures, including valuation methodologies, must be reviewed at least annually, including by the fund manager’s risk management function.

Pricing of units in a LTAF

• The unit price must be calculated on the basis of the valuation of the LTAF’s assets. 
• It must be done in a manner that is fair and reasonable as between unitholders.
• On at least a monthly basis the fund manager must publish the unit price of each unit class of the LTAF in an appropriate manner. 
• The fund manager must also provide an estimated unit price at the request of any unitholder of the LTAF.