The corporate watchdog is monitoring illiquid asset valuations of responsible entities, given the increased economic and financial uncertainties stemming from the COVID-19 pandemic.
The Australian Securities and Investments Commission (ASIC) said responsible entities might face issues such as a lack of comparable transactional data, and uncertainties around cash flow forecasts, the shape and timing of any economic rebound, the selection of an appropriate discount rate in an environment of very low government bond yields, and the risk premiums that should be attached to the risk free rate.
“As a result, responsible entities may need to carry out valuations more often to ensure reliable asset values and member unit prices,” ASIC said.
“Where valuations are uncertain for a material proportion of a fund’s assets, the responsible entity needs to consider whether it is in a position to establish a reliable unit price. If not, the responsible entity may need to temporarily suspend entry and exit from the fund.
“…it is more important than ever that valuations of managed fund assets are regular, robust and reasonable.”
It said accurate valuation of fund assets, including illiquid assets, was needed for a responsible entity to determine:
ASIC noted that while the pandemic continued to disrupt markets, it encouraged responsible entities to ensure:
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It's more important than ever to increase valuations a couple of days out from yearend if you've had a bad year.
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