The Financial Conduct Authority (FCA) is to visit a selection of fund managers this year to inspect their valuation practices for private equities and other unquoted assets.

In the inspection, the watchdog will look at valuation committees and their reference points – including the information they receive from the investment manager, as well as the oversight investment company boards provide, said FCA’s director of wholesale buy-side Camille Blackburn.

‘We’ll pick a few firms across the ecosystem. We’ll go in and ask about governance and some of the practices that they employ, and we can expect to see an outcome statement of that multi-firm activity at the end of the year,’ she told the Association of Investment Companies’ director conference on Thursday.

Blackburn (pictured) also noted that while there would likely be an outcome statement at the end of the year – highlighting good and bad practices and the likely consequences of that – it would be unlikely that any changes would be made until next year.

The FCA’s review of private asset valuations was first reported last September. It came six months after Amar Bhidé resigned as a non-executive director of Scottish Mortgage (SMT ) after a row about the board’s capacity to oversee the substantial unquoted holdings assembled by Baillie Gifford fund managers in its £12bn global equity portfolio.

At the time, Bhidé said he would raise his concerns with the regulator. In response, Baillie Gifford publicised how its in-house committee actively reviewed and updated valuations of private equities with the assistance of S&P Global as an external consultant.

Concern over the delay in reporting private equity valuations at a time of an economic slowdown is one reason why London-listed private equity funds trade on substantial discounts to asset value – currently 23% when the premium-rated 3i Group (III ) is excluded. 

Nevertheless, so far overall there has not been the level of writedowns that would justify such caution or bearish share prices, while private equity funds have continued to sell holdings at premiums above their previous valuations.

In an update earlier this month, Blackburn said a higher interest rate and tighter credit environment had placed pressure on the valuations of some assets.

As a higher proportion of fund assets globally are now held in private assets, where practices are not as transparent or consistent as those for publicly traded securities, it was vital that investors could trust that valuations were robust and reliable in all market conditions, she said.

Her statement comes off the back of last year’s review of liquidity management, which recommended that fund managers do more to ensure their funds do not get stuck in positions that are hard to exit, particularly if they are under pressure to return cash to redeeming investors.