Scope of the valuation rules
FUND 3.9.1R binds a full-scope UK AIFM of a UK AIF and of a non-UK AIF. A small authorised UK AIFM is subject to no specific valuation rules.
FUND 3.9.2R makes the AIFM responsible for the proper valuation of AIF assets, the calculation of net asset value and the publication of that value, whether the work is done in house or by an external valuer. Every valuation must be performed impartially and with all due skill, care and diligence.
In-house valuation is permitted only where the valuation task is functionally independent of portfolio management and the remuneration policy and other measures mitigate conflicts and prevent undue influence on the employees involved (FUND 3.9.7R). Otherwise an external valuer must be appointed.
Valuation frequency and NAV disclosure
The AIFM must establish appropriate and consistent procedures so that a proper and independent valuation can be performed and the NAV per unit or share is calculated and disclosed to investors. The Handbook is silent on the contents of a valuation policy.
Investors must be informed of the valuations and NAV calculations in the manner set out in the instrument constituting the fund.
No provision sets a threshold at which a mark between valuation dates becomes stale. The FCA's March 2025 multi-firm review of private market valuation practices named defined processes for ad hoc valuations, with events and thresholds, as an area for improvement.
External valuers
Regulation 24(2) of the AIFMD UK Regulation prohibits an external valuer from delegating valuation to a third party. A depositary of the AIF may act as its external valuer only where it has functionally and hierarchically separated the two roles and the conflicts are identified, managed, monitored and disclosed to investors (FUND 3.9.8R).
The appointment must be notified to the FCA on the material change form at SUP 15 Annex 6C R. Under regulation 24(3) the FCA may require a different valuer where it considers the appointment does not comply with those conditions.
Level 2 operational requirements
Articles 67 to 74 of the AIFMD level 2 regulation carry the operational detail and the Handbook reproduces none of it.
| Requirement | Level 2 | Draft ALTS counterpart |
|---|---|---|
| A methodology for every asset type, settled before investing in a new type | art 67 | ALTS 6.3.2R |
| Models validated by someone who did not build them, approved by senior management | art 68 | ALTS 6.3.6R, large AIFMs only |
| Consistency across assets, over time and across the manager's funds | arts 69, 70 | ALTS 6.3.5R |
| Review triggers and checks, including back-testing proceeds and stale-price testing | art 71 | None in draft ALTS chapter 6 |
| Correction of an incorrect NAV and compensation of the investors harmed | art 72 | None in draft ALTS chapter 6 |
| Professional guarantees from an external valuer | art 73 | ALTS 6.2.11R(2) |
| Assets outside custody revalued once the last value is no longer fair value | art 74 | ALTS 6.2.6R(3) |
Currency
Articles 67 to 74 were not read at source for this course. The left column carries the legacy AIFMD materials.
Valuation conflicts
An AIFM must take all reasonable steps to identify conflicts, including between one AIF and another and between an AIF and another client, to avoid them, and to manage, monitor and where applicable disclose those it cannot avoid.
The March 2025 review found firms identifying and documenting valuation conflicts incompletely, listing fees and remuneration alongside conflicts linked to marketing, secured borrowing, asset transfers, redemptions and subscriptions, and incentives relating to uplifts and volatility. Independence in valuation decision making and in committee voting membership was a further area for improvement. No rule reaches the composition of a valuation committee.
Proposed UK rules and the EU position
Proposed, not law
CP26/28 was published in July 2026. Feedback closes on 14 October 2026, final rules are aimed at 2027 alongside the Treasury's finalised statutory instrument, and implementation is intended for 2028. The draft valuation rules are chapter 6 of the proposed ALTS sourcebook and bind nobody today.
Valuation rules would reach every AIFM, whatever the size of the manager (CP26/28 4.11). Draft ALTS 2.3.10R sets the size tiers on aggregate NAV: below £750 million small, £750 million to £5 billion medium, over £5 billion large.
Draft ALTS 6.2.10R would require a large UK AIFM to value independently of portfolio management, with the final determination on any asset or liability kept out of that function. Small and medium AIFMs would take all appropriate steps to manage and mitigate valuation conflicts.
The Treasury proposes to remove the statutory provisions on external valuers, including strict liability for valuations, leaving no legal obligation on a firm acting as external valuer of all of a fund's assets and liabilities (CP26/28 4.6).
EU law
Directive (EU) 2024/927 amends the 2011 Directive on delegation, liquidity risk management, supervisory reporting, depositary and custody services and loan origination. Valuation is not among them. A UK group managing an EU AIF reads Article 19 unamended.
Alongside this module
Where this subject is covered elsewhere in the course.