The CSSF expects all Investment Fund Managers (“IFMs) to self-assess their valuation frameworks and remediate gaps. Supervisory follow-up is expected.
Background
The CSSF has published a Feedback Report following its thematic review of the valuation frameworks applied by Luxembourg-domiciled investment fund managers to less liquid and illiquid assets. The review, conducted over 2024 and 2025, covered AIFMs and UCITS management companies managing funds invested in private equity, real estate, infrastructure, private debt, and fund of funds strategies.
The review builds on earlier supervisory work, including the ESMA Common Supervisory Action of 2022, and takes into account the recently published IOSCO Final Report on Valuing Collective Investment Schemes (June 2026). Importantly, the CSSF has asked all IFMs, including those not covered by the ESMA review, to benchmark their frameworks against these findings and implement corrective measures where gaps are identified.
Key findings and actions required
The CSSF's findings are structured around two main areas: valuation policies and procedures and, valuation controls. We set out below the principal observations and the specific actions the CSSF expects IFMs to take.
Pre-launch and new asset onboarding reviews
IFMs must ensure their written valuation policies formally require a structured review before launching any new (sub-)fund or investing in a new asset type. This review should confirm that:
appropriate valuation methodologies are in place for the new fund or asset type;
ongoing pricing and data sources will be available at the required NAV calculation frequency; and
independent valuation can be maintained throughout the full investment lifecycle, from acquisition to disposal.
The CSSF has highlighted that absent or insufficient pre-launch checks have contributed in a limited number of cases to modified audit opinions on fund financial statements. This is an area requiring immediate attention where gaps exist.
Valuation frequency alignment
Valuation policies must include controls to ensure that the frequency at which individual assets are valued aligns with the NAV calculation frequency of the fund. For assets that fall outside the definition of "financial instruments", such as real estate and private equity, valuations must be triggered not only annually but also whenever there is evidence that the last determined value is no longer fair or proper. IFMs should verify that the necessary controls exist to make this assessment at each NAV calculation date.
Valuation methodologies and model governance
Valuation approaches and methods (reference was made in particular to the market approach, the income approach and the replacement cost approach) must be adequately described and documented in written policies for each asset type. Where models are used, policies must clearly explain and justify the model, its underlying data and assumptions, the rationale for its use, and its inherent limitations. In addition:
senior management approval is required before any model is put into use;
models must be subject to at minimum annual review by senior management;
any material change to a model (such as a change in the method of calculating the discount rate) must be independently validated and approved by senior management; and
all steps in the above process must be appropriately documented.
The CSSF has observed in limited cases that senior management approval was not obtained prior to model use and that adequate periodic review processes were not in place. IFMs should audit their model governance arrangements accordingly. The CSSF also observed that where valuation standards (such as IPEV guidelines for private equity or RICS standards for investments in real estate) are used that they should be consistently applied in order to ensure a reliable valuation on an ongoing basis.
Valuations under stressed market conditions
IFMs must ensure that their valuation policies address how assets will be valued under exceptional situations and stressed market conditions, including idiosyncratic events affecting individual holdings. The CSSF does not require a separate policy document for these circumstances, but expects existing policies to:
provide clear and actionable valuation methodologies applicable across all market conditions;
enable IFMs to adapt their approaches flexibly and swiftly, for example, moving from a transaction-based to a model-based approach for real estate valuations in a market dislocation; and
incorporate lessons learnt from past market stress episodes as part of the periodic review of valuation policies.
Escalation processes
In the event of significant valuation issues, whether fund-specific or market-driven, IFMs must ensure timely escalation to both the senior management of the IFM and the board or governing body of the relevant fund. The CSSF stresses that fund boards bear ultimate responsibility for fund governance and must be proactively informed of material valuation difficulties so that they can exercise effective oversight and, where necessary, direct remediation. Valuation policies should expressly provide for this dual escalation obligation.
Pre-investment valuation controls
AIFMs should implement risk-based pre-investment valuation checks prior to acquiring less liquid or illiquid assets. These checks should confirm that the relevant asset can be reliably valued post-acquisition in accordance with the fund's offering document, applicable regulation, and existing valuation policies. Written policies should clearly set out the allocation of responsibilities for these checks and the role of the internal valuation function, calibrated to the risk profile of the targeted investment.
Oversight of third-party valuers
Where AIFMs rely on third-party experts or valuation service providers to support their internal valuation function, they must maintain specific, documented controls over the inputs and reports received from those parties. These controls should verify the reliability and reasonableness of the data feeding into valuation models. IFMs must also:
conduct thorough due diligence on third-party providers at the time of appointment; and
maintain ongoing oversight throughout the engagement, particularly where potential conflicts of interest may arise, for example, where a provider performs multiple delegated functions with fee structures linked to the fund's NAV.
Overall CSSF expectation and next steps
The CSSF has made clear that it expects all IFMs, not merely those reviewed in the sample, to conduct a self-benchmarking exercise against the observations set out in the Feedback Report and to implement remediation where needed. IFMs that were assessed in the context of the 2022 ESMA Common Supervisory Action should also verify that all remediation committed to by 31 December 2023 has been completed and documented. Firms that have not yet addressed previously identified gaps should anticipate follow-up supervisory engagement.
Share on
