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Fund managers to provide more disclosures under new guidelines

Fund managers to provide more disclosures under new guidelines By Steve Umidha @UmidhaSteve In a move to restore investor confidence, the Capital Markets Authority (CMA) Monday published a new raft of guidelines that will require fund managers to provide more disclosures in their operations. The new guidance which takes effect on 1 January 2021 is expected to entrench international best practice in the capital markets by standardizing investment performance measurement and presentation by collective investment schemes. ‘The Authority has overtime noted inconsistencies in performance measurement and presentation in the collective investment schemes industry. These observations and feedback from the market necessitated the development of the new Guidance to enhance the comparability and consistency of information presented in performance reports generated by CISs’, said CMA Acting Chief Executive Wyckliffe Shamiah. The standardization of performance measurement and presentation is critical to investor protection and the fair treatment of customers. ‘The Guidance will enhance accountability and transparency in the reporting of CISs’ performance which will in turn boost investor confidence, said ICIFA Chief Executive, FA Diana Muriuki-Maina. Under the Guidance, fund managers will be required to establish comprehensive, documented investment policies and procedures to govern the valuation of assets held by a CIS. Such policies will also identify the methodologies that will be used for valuing each type of asset and will clearly indicate how performance will be calculated, measured and presented. Fund managers will also be required to have policies and procedures in place to detect, prevent and correct pricing errors that result in material harm to CIS investors. The Guidance requires fund managers to provide performance measurement reports to the Authority and all existing and prospective investors, within 21 days after the end of each quarter. In determining the total assets under management, fund managers will consider: - the aggregate fair value of all assets without double counting any assets, actual assets managed by the fund manager including fee-paying and non-fee-paying portfolios and assets outsourced to another fund manager. The fund manager will also disclose the periodicity of the benchmark if benchmark returns are calculated less frequently than monthly. The benchmark used shall be relevant to the fund strategy, of the same return type, in the same currency and for the same periods for which the returns are presented. Portfolios will be valued daily in line with the definition of fair value under International Financial Reporting Standards (IFRS 13). However, external valuations for real estate investments will be performed by an independent registered property valuer at least once every three years. The Guidance intended for all CISs approved by the Authority will be read together with the Capital Markets (Collective Investment Schemes) Regulations, 2012.

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In a move to restore investor confidence, the Capital Markets Authority (CMA) Monday published a new raft of guidelines that will require fund managers to provide more disclosures in their operations.

The new guidance which takes effect on 1 January 2021 is expected to entrench international best practice in the capital markets by standardizing investment performance measurement and presentation by collective investment schemes.

‘The Authority has overtime noted inconsistencies in performance measurement and presentation in the collective investment schemes industry.

These observations and feedback from the market necessitated the development of the new Guidance to enhance the comparability and consistency of information presented in performance reports generated by CISs’, said CMA Acting Chief Executive Wyckliffe Shamiah.

The standardization of performance measurement and presentation is critical to investor protection and the fair treatment of customers.

‘The Guidance will enhance accountability and transparency in the reporting of CISs’ performance which will in turn boost investor confidence, said ICIFA Chief Executive, FA Diana Muriuki-Maina.

Under the Guidance, fund managers will be required to establish comprehensive, documented investment policies and procedures to govern the valuation of assets held by a CIS.

Such policies will also identify the methodologies that will be used for valuing each type of asset and will clearly indicate how performance will be calculated, measured and presented.

Fund managers will also be required to have policies and procedures in place to detect, prevent and correct pricing errors that result in material harm to CIS investors.

The Guidance requires fund managers to provide performance measurement reports to the Authority and all existing and prospective investors, within 21 days after the end of each quarter.

In determining the total assets under management, fund managers will consider: – the aggregate fair value of all assets without double counting any assets, actual assets managed by the fund manager including fee-paying and non-fee-paying portfolios and assets outsourced to another fund manager.

The fund manager will also disclose the periodicity of the benchmark if benchmark returns are calculated less frequently than monthly. The benchmark used shall be relevant to the fund strategy, of the same return type, in the same currency and for the same periods for which the returns are presented.

Portfolios will be valued daily in line with the definition of fair value under International Financial Reporting Standards (IFRS 13). However, external valuations for real estate investments will be performed by an independent registered property valuer at least once every three years.

The Guidance intended for all CISs approved by the Authority will be read together with the Capital Markets (Collective Investment Schemes) Regulations, 2012.

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