Fair Value Pricing Survey, Tenth Edition
Looking back and looking forward: Perspectives on fair value — past, present, and future
When Deloitte issued its first Fair Value Pricing Survey just over ten years ago, our goal was to help mutual fund firms benchmark their valuation policies and procedures to others in the industry. Since that first survey, Deloitte’s Asset Management Services practice has been compiling, analyzing, and discussing industry valuation trends with mutual fund executives, fund board directors, regulators, and many others to help identify effective practices and emerging approaches, as well as capture industry reactions to significant market fluctuations and other events. Today, participation in the survey has grown to 87 U.S. asset management firms, representing more than $5 trillion in assets under management.
While our survey findings have changed over the years, what is most telling is what didn’t change: valuation never wavered as a top issue and a top risk for mutual funds. As we look back on our survey findings over the past decade, five key themes emerge:
- Greater focus on foreign securities
- Participation of third-party pricing vendors
- Firm size less of a factor
- Formalization of valuation controls and due diligence
- Valuation governance a perennial top-of-mind issue
In this tenth edition, new survey questions shed light on governance and oversight, risk management, technology, and human resources. The survey shows mutual fund firms continue to refine their fair valuation practices and procedures, especially as external events inevitably force the industry to react.
Key findings include:
- Fund managers are keeping a close eye on Europe, China and larger macroeconomic trends: 43 percent and 48 percent of survey participants reported applying fair value policies to review for significant events for foreign corporate debt and sovereign debt, respectively, an increase from 2011.
- With the U.S. Securities and Exchange Commission requesting information from a number of mutual funds about their pricing vendor practices, more than a quarter of respondents (29 percent) indicated that they had updated their onsite due diligence process in response.
- In a jump from last year, 77 percent of survey participants indicated that they compare equity prices received from their primary pricing source to a secondary source each day.
- With risk management being at the forefront of the minds of both management and fund boards, nearly half of survey participants – 48 percent – said that their fund group has identified the risks associated with the valuation of individual investment types (versus investment risks more generally) as part of their risk assessment process. All but five percent said that they had one or more controls in place to help reduce the likelihood of each risk occurring.
Learn more about our survey and 10-year retrospective.