On 29 May 2026, the Monetary Authority of Singapore (MAS) issued two information papers addressing key regulatory expectations for fund management companies (FMCs): one concerning valuation practices and the other addressing risk management practices. This client alert summarizes the key observations and expectations set forth in each information paper.

Valuation practices for FMCs

Background

The Valuation Practices for Fund Management Companies information paper outlines supervisory expectations for effective governance structures, frameworks, policies and procedures (P&Ps), and controls with respect to the valuation of funds’ assets.

The expectations are drawn from thematic valuation inspections of selected FMCs across a range of investment strategies, including equity funds, fixed income funds, hedge funds, private credit funds and fund-of-funds.

Governance

MAS expects the board and senior management (BSM) of the FMC to put in place appropriate governance structures, P&Ps, and controls to govern valuation matters. Valuation should be overseen by senior management members with sufficient expertise and independence from the portfolio management function.

Key findings include:

• Most FMCs engaged third-party service providers such as external valuers or fund administrators to perform independent valuation and net asset value (NAV) reporting.
• FMCs either designated senior management members or set up dedicated committees to oversee valuation matters.
• Some smaller FMCs appointed senior management members involved in portfolio management to oversee the valuation of certain assets, creating conflicts of interest.
• A few FMCs did not establish terms of reference (ToR) for their committees or had inadequate ToR, lacking coverage of key operational areas.

Policies and procedures

FMCs should establish comprehensive valuation P&Ps covering the full range of asset classes and financial instruments their funds can invest in.

P&Ps should clearly identify all parties involved in the valuation process, include appropriate valuation methodologies and frequency, outline escalation procedures, and specify record-keeping requirements.

Areas of improvement observed:

• Some FMCs failed to comply with their P&Ps and did not document the basis for deviations.
• A few FMCs failed to review their P&Ps at least annually to ensure that they remained relevant and updated.
• Some FMCs' P&Ps did not reflect current practices or contain sufficient guidance.

Ongoing price validation checks

FMCs should implement independent and ongoing price validation checks to ensure the integrity of the valuation process and reliability of the fund's NAV. Most FMCs relied on third-party service providers such as fund administrators to independently value fund assets and perform ongoing price validation checks. At minimum, FMCs implemented at least two types of price validation checks, supported by predefined tolerance levels and escalation procedures for handling exceptions.

Examples of price validation checks include price variance checks, source-to-source checks, missing price checks, stale price checks, index checks, and NAV variance checks.

Key concerns raised by MAS:

• Some FMCs had inadequacies in identifying and assessing securities with stale prices.
• One FMC only received stale price reports monthly despite managing funds with daily and weekly dealing frequencies.
• Some FMCs lacked predefined tolerance levels or applied uniform thresholds without accounting for different asset characteristics.
• Some FMCs failed to maintain proper records of price validation checks performed.

Valuation approaches and methodologies

The valuation of funds' assets should be performed by competent parties independent of the portfolio management function. FMCs should clearly disclose to investors the names and use of third-party valuation service providers, any material involvement by the FMCs in the valuation process, and a description of valuation methodologies.

MAS highlighted specific concerns regarding:

• Private credit funds: One FMC reclassified restructured non-performing loans as performing loans without making valuation adjustments, resulting in overstated NAV and overpaid management fees.
• Digital assets: One FMC failed to establish appropriate valuation P&Ps before launching a digital asset fund, leading to delays in NAV computation and eventual closure of the fund.
• Several FMCs did not critically assess the veracity of information provided by portfolio companies used as inputs for valuation models.
• A few FMCs did not conduct adequate due diligence on third-party valuation service providers prior to appointment, failing to sufficiently assess their independence, qualifications, competence, and valuation methodologies. Periodic reviews of these providers' performance were also not consistently performed.

MAS emphasises that effective valuation practices safeguard fair treatment for all investors and uphold the integrity of fund operations. Weak valuation practices can lead to erroneous subscription and redemption calculations, distortion of fund performance, improper valuation of asset transfers, and excessive payment of fees.

FMCs should stay current with evolving valuation best practices and continuously strengthen their frameworks, P&Ps, and controls to support sound judgement and reinforce investor confidence in the fairness and integrity of asset valuations. 

Risk management practices for FMCs

Background

The Risk Management Practices for Fund Management Companies information paper sets out supervisory expectations for effective governance structures, frameworks, P&Ps, and controls for overseeing and managing FMCs’ investment process.

The expectations are based on thematic inspections of selected FMCs across a range of investment strategies, including those conducted by external auditors appointed by MAS.

Governance

MAS expects BSM to put in place governance structures and controls for new fund launches, investment due diligence, and ongoing monitoring of investments. 

BSM should identify conflicts of interest and implement effective controls and segregation of duties to mitigate them. BSM should also be kept apprised of investment matters on a timely and regular basis.

Key findings include:

• BSM of some FMCs managing private credit funds failed to put in place appropriate risk management frameworks.
• Some FMCs did not consider MAS Guidelines on Risk Management Practices for Credit Risk when implementing their frameworks.
• BSM of a few FMCs did not identify all pertinent conflicts of interest or implement effective mitigation measures.
• For one FMC, the head of risk reporting lacked sufficient stature relative to other committee members to effectively challenge decisions.

Policies and procedures 

FMCs should establish comprehensive P&Ps covering all aspects of their fund management activities and operations. The roles and responsibilities of all parties, escalation procedures, and record-keeping requirements should be clearly defined.

Areas of improvement observed:

• A few FMCs only established relevant investment P&Ps after the funds were launched, with one FMC taking almost a year to do so.
• Some FMCs failed to comply with their P&Ps in areas such as breach reporting, conducting due diligence, and performing annual reviews.
• Some FMCs did not update P&Ps to reflect ongoing practices or provide sufficient guidance.

New fund launches and changes to existing funds

Before launching new funds, FMCs should consider the fund's investment objectives and strategies, their own experience and expertise, and legal and regulatory requirements.

Prior to marketing new or existing funds, FMCs should ensure relevant fund documents and marketing materials are accurate and not misleading.

Key concerns raised by MAS:

• An FMC managed a private credit fund that financed trade suppliers but did not evaluate the suppliers' creditworthiness when the repayment source changed.
• An FMC failed to ensure portfolio managers had adequate investment management experience to manage a new fund.
• Some FMCs did not assess the suitability of service providers prior to launching new funds.
• Some FMCs failed to ensure marketing materials accurately reflected fund features.

Investment due diligence

FMCs should conduct sufficient due diligence on every potential investment, including assessing authenticity and suitability and evaluating the reasonableness of projected return-risk profiles.

Key concerns raised by MAS:

• An FMC managing a trade receivables fund did not conduct adequate due diligence to assess the authenticity of trade receivables or the associated credit risk.
• Two FMCs managing private credit funds failed to assess the credit quality and financial strength of guarantors before accepting their guarantees.
• Some FMCs did not perform adequate due diligence on third-party managers or holistically consider the governance structures of fund managers when selecting underlying funds.
• Some FMCs maintained limited records and did not document their quantitative, qualitative, or comparative assessments of potential
  investments.

Ongoing monitoring of investments

• Some FMCs did not put in place independent mechanisms to monitor risks. Compliance with investment or risk limits was instead performed only by portfolio managers.
• An FMC of a private credit fund continued to roll over credit to a borrower for almost two years without performing any credit review.
• An FMC failed to put in place controls to safeguard collateral pledged to the fund, resulting in an inability to enforce on collateral when a loan defaulted.
• Some FMCs provided inadequate or inaccurate disclosures to investors. 

MAS emphasises that across the lifecycle of a fund, FMCs should put in place robust governance, adequate P&Ps, and sound risk management practices to ensure relevant risks are accurately identified, appropriately managed, and transparently communicated to investors.

Good governance and a robust system of risk and internal controls reduce risks to investors, including exposure to inadequately structured products, unexpected losses from undisclosed strategy shifts, heightened default risk from inadequate due diligence, and exacerbated losses from delayed detection of defaults or breaches.

FMCs should remain vigilant in staying abreast of evolving best practices. They should continuously enhance their frameworks, P&Ps, and controls to support robust risk management and safeguard investors' interests. 

Conclusion

Taken together, the two information papers signal MAS' heightened focus on end-to-end fund governance, from valuation integrity to investment risk oversight. FMCs should review their existing governance structures, valuation frameworks, due diligence processes, and monitoring controls against the supervisory expectations set out in both papers and promptly remediate any gaps identified.

FMCs managing private credit funds, digital asset funds, or fund-of-funds should pay particular attention given the specific concerns highlighted by MAS in these areas. Continued regulatory collaboration underpins Singapore's position as a trusted and forward-looking asset management hub.

For more information on MAS’ supervisory expectations outlined in the information papers, please get in touch with your usual Reed Smith contact.

Client Alert 2026-126