On 24 May 2023, the European Securities and Markets Authority (ESMA) published a final report on the 2022 Common Supervisory Action (CSA) on valuation.


In January 2022, ESMA launched a CSA with Member State national competent authorities (NCAs) on the supervision of the asset valuation rules under the UCITS Directive and Alternative Investment Fund Managers Directive (AIFMD).

While the AIFMD and UCITS frameworks include provisions on the implementation of the valuation function and the required policies and procedures, as well as on the disclosure to investors, the rules applicable to the valuation of assets are not harmonised at the level of the EU and are therefore subject to national legislation.

The CSA’s aim was therefore to assess, foster and enforce the compliance of supervised entities with the organisational requirements with respect to asset valuation, as well as adherence to valuation principles and methodologies with a view to reflecting a true and fair value of their financial positions both under normal and stressed market conditions in line with the applicable rules.


The report sets out the analysis and conclusions from the 2022 CSA exercise and finds room for improvement in the following areas:

  • The appropriateness of valuation policies and procedures: broadly, NCAs reported a satisfactory level of compliance by supervised entities, however there is room for improvement on a few deficiencies which were detected regarding: i) lack of documented and established valuation policies and procedures (including regular reviews) that clearly allocate operational tasks and responsibilities for asset valuation; and ii) lack of a clear definition of the valuation model to be applied, as well as its validation.
  • Valuation under stressed market conditions: most NCAs reported that the majority of managers in scope of the exercise periodically perform stress tests to monitor the liquidity level of their portfolio, however issues were spotted on valuation policies and procedures that do not distinguish between normal and stressed market conditions and a lack of systemic incorporation of the outcome of liquidity stress testing, particularly for less-liquid assets.
  • Independence of the valuation function and use of third-party valuers: despite an overall positive assessment from NCAs, issues arose in some specific cases with regards to: i) the lack of independence of the valuation function, particularly from portfolio management; and ii) smaller managers which, in some instances, appeared to over-rely on third-party data providers for the pricing of less liquid assets, without performing the appropriate checks, controls and back testing.
  • Early detection mechanisms for valuation errors and transparency to investors: while, on substance, the results of the analysis showed a broad level of compliance, the analysis suggests that remedial procedures to ensure an early detection of valuation errors and full investors’ compensation are not always appropriately formalised.
  • Focus on private equity and real estate assets: issues arise in the alignment between the net asset value (NAV) calculation, the asset valuation frequency and the availability of up-to-date data not only for private equity funds, but for all funds invested in less liquid assets and, even more so, for those funds offering daily redemptions, such as some types of real estate funds.

Next steps

Building on the findings of the CSA exercise, ESMA will facilitate discussions among NCAs on the topic of asset valuation, particularly under stressed market conditions, in order to ensure that both market participants and NCAs are better prepared to address valuation-related challenges in future periods of stress.

Moreover, ESMA welcomes that NCAs have planned to follow-up on the deficiencies identified in the course of the CSA and encourages the use of enforcement where appropriate.