CFAs support limited regulation for private markets
Chartered financial analysts (CFAs) support a limited degree of regulation in private markets, according to a new report from the CFA Institute.
More than half (51 per cent) of CFAs told the institute that while some practices could be improved, problems in private markets are “not significant”. Meanwhile, 17 per cent said that the markets function well.
Most of the CFAs surveyed for the report said they would support regulatory requirements around quarterly statements, annual audits, and an independent fairness or valuation opinion of any adviser-led secondary transactions.
CFAs noted that their top three private market concerns were the frequency and accuracy of valuation reporting; the frequency, comparability, and accuracy of performance measures; and the fairness and transparency of fees.
Read more: Regulators increase scrutiny of insurers’ private credit investments
“Private markets can seem like a polarised landscape with often sharply divergent policy views” said Stephen Deane, CFA, and senior director, capital markets policy at the CFA Institute.
“But our research reveals a missing middle ground among the investment professionals who make up our membership.
“A majority of members surveyed took a moderate position. While they believe room exists for improvement in private market practices and limited new regulation, they also say that problems are not significant, do not represent a market failure, and do not call for drastic new regulation.
“Their biggest concerns revolve around valuation, performance measures, and transparency, in particular better disclosure of fees and expenses.”
Read more: Private credit set for largest target allocation growth among alternatives
70 per cent of the CFAs surveyed said they would like to see quarterly statements that include information on private fund’s fees, expenses, and performance.
Another 70 per cent would support an annual financial statement audit of the private fund performed by an independent public accountant. A further 61 per cent are in favour of a fairness or valuation opinion of any adviser-led secondary transaction.
Read more: Private credit valuations “appropriately priced”
