Deloitte Fair Valuation Survey Observes Shifts Amid Pandemic, Proposed Valuation Rule

November 24, 2020

The 18th edition of Deloitte’s fair valuation pricing survey captures how the challenges of 2020 have affected mutual funds as they valued their investments. According to the report, 48 percent of survey participants experienced delays in calculating their daily NAVs due to the impact of the COVID-19 pandemic. Many others reported delays in receiving pricing data from an exchange or third-party pricing vendor or because of other matters, including market volatility and the turbulent oil pricing environment experienced earlier in the year. The report also discusses the SEC’s proposed Good Faith Determinations of Fair Valuation rule and the comments received on the SEC’s proposal. Deloitte observes that the proposed rule’s focus on “active” board oversight could require a change in board practices if adopted in its current form. For instance, the proposal requires quarterly reporting and certain in-between prompt reporting of matters associated with the investment adviser’s process. Deloitte notes that its data indicate that “board oversight contains many well-established practices and procedures that management and the board have crafted, refined, and feel are helpful in performing oversight, and it is not an area undergoing rapid change.” The report warns against a one-size-fits-all model for board oversight. “Anything that suggests a prescribed way to perform such a responsibility is likely to be met with skepticism.” Deloitte will present a Forum webinar on the survey in early December. Other findings from the report:

56 percent of survey participants made changes to their policies and procedures over the past year, down slightly from the 63 percent making changes in the prior year’s survey.
47 percent of survey participants expect the pandemic will have the most significant impact and pose the biggest challenges over the next year.
37 percent of survey participants indicated that the SEC’s proposed valuation rule could have a greater effect on the valuation process than those caused to date by the pandemic.