While it’s clear that Covid-19 will have an economic impact on companies and their underlying investments, there is considerable uncertainty as to the extent and duration of this. Lockdowns and other significant restrictions bring a significant curtailment of normal economic activity, leading to business closures, bankruptcies and job losses, despite the growing level of government support.
Financial markets’ reactions to the pandemic include plummeting and highly volatile stock markets, and increasing credit spreads. In addition, we have seen a significant reduction in the liquidity of many asset classes, postponed M&A transactions and the temporary closure of small financial markets. This market turmoil leads to increased valuation uncertainty as well as significant pressure on fund liquidity as investors look to redeem or reallocate holdings.
As a response, asset managers have started to take significant protective measures, as illustrated by the recent decision from well-known asset managers to gate or suspend open-ended real estate investment funds to ensure equal treatment between investors.
Regulators across the globe have started asking for additional information from asset managers. Both the Irish and Luxembourg regulators have been investigating the ability of investment fund managers to meet large investor redemptions and have imposed additional reporting requirements, while the SEC has asked whether funds have experienced any delays in, or concerns with, pricing services providing daily prices.
Download our latest paper to explore the key issues that asset managers should address when it comes to the valuation of investment funds’ assets. You can also review our latest insights and thinking to support you in leading through these volatile times; don’t hesitate to reach out if you have any questions.