The Capital Markets Authority, CMA now requires fund managers to establish comprehensive, documented investment policies and procedures to govern the valuation of assets held by collective investment schemes.
This is according to the published Guidance to Fund Managers of Collective Investment Schemes on Valuation, Performance Measurement, and Reporting which takes effect on 1st January 2021.
According to a statement by CMA the rules are expected to standardizing investment performance measurement and presentation by collective investment schemes to international standards.
“The Authority has overtime noted inconsistencies in performance measurement and presentation in the collective investment schemes industry. These observations and feedback from the market necessitated the development of the new Guidance to enhance the comparability and consistency of information presented in performance reports generated by CISs,” said CMA Acting CEO Wyckliffe Shamiah.
Fund managers will also be required to have policies and procedures in place to detect, prevent and correct pricing errors that result in material harm to CIS investors according to CMA.
Fund managers will also to provide performance measurement reports to the Authority and all existing and prospective investors, within 21 days after the end of each quarter.
Fund Managers Association has backed to new policy enhance standards in the practice and ensure investor protection and fair treatment of customers.
“FMA welcomes the clarity and standardization that the Guidance provides, and that it is aligned with global professional performance standards,” said FMA Chairman, Jonathan Stichbury.
The Guidance requires fund managers to provide performance measurement reports to the Authority and all existing and prospective investors, within 21 days after the end of each quarter.
The Guidance similarly requires fund managers to identify the methodologies that will be used for valuing each type of asset and clearly indicate how performance will be calculated, measured and presented
In determining the total assets under management, fund managers will consider: – the aggregate fair value of all assets without double counting any assets, actual assets managed by the fund manager including fee-paying and non-fee-paying portfolios and assets outsourced to another fund manager.
If a fund manager of a CIS chooses to use a benchmark for risk and return analysis, it shall disclose in the performance report the benchmark description, including the key features of the benchmark or the name of the benchmark for a readily recognized index or other points of reference.
Fund managers are required to disclose the periodicity of the benchmark if benchmark returns are calculated less frequently than monthly.
The benchmark used shall be relevant to the fund strategy, of the same return type, in the same currency, and for the same periods for which the returns are presented.
Portfolios will be valued daily in line with the definition of fair value under International Financial Reporting Standards (IFRS 13).
However, external valuations for real estate investments will be performed by an independent registered property valuer at least once every three years.
The Guidance intended for all CISs approved by the Authority will be read together with the Capital Markets (Collective Investment Schemes) Regulations, 2012.