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The ADGM Fund Rules govern valuation and pricing through a graduated structure that tracks the three domestic fund types.
The ADGM Fund Rules govern valuation and pricing through a graduated structure that tracks the three domestic fund types. A Public Fund carries the full valuation and pricing rules in Rules 12.4 and 12.5, the detailed minimum-standard guidance in Appendix 4, and an oversight-arrangement layer that reaches asset pricing and fund valuation. An Exempt Fund carries the full Rules 12.4 and 12.5 and Appendix 4, without the mandatory oversight-provider layer. A Qualified Investor Fund carries one paragraph, Rule 12.4.1(b), and nothing else: Rule 12.5 does not apply, and Appendix 4 does not apply.
For the question that matters to an investor whose manager charges a performance fee, whether the rules restrain a manager from valuing its own fund in a way that pays itself, the graduation is decisive. The specific control against manager-influenced valuation sits in Rule 12.4.2(1)(b) and in the Appendix 4 minimum standards, and both are among the provisions that fall away as the fund type moves from Public and Exempt down to Qualified Investor Fund. Where valuation governance is thinnest, the exposure created by a performance fee is greatest, and those two conditions coincide precisely in the Qualified Investor Fund.
Rule 12.4.1(1) sets four duties for a fund manager: to have “comprehensive and well documented valuation policies and procedures” for timely and accurate valuation; to value Fund Property “at regular intervals as appropriate to the nature of the Fund, market practice and investor expectations” and in accordance with the Constitution or Prospectus; to prepare a valuation for each type of unit at each valuation point; and to publish the unit price to unitholders and prospective unitholders. Rule 12.4.1(2) defines the value as the net value after deducting expenses and outstanding borrowings, and Rule 12.4.1(5) requires any dilution levy to be permitted by the Prospectus and applied fairly and solely to reduce dilution.
Rule 12.4.2 adds two protections. Rule 12.4.2(1)(b) requires the manager not to “do, or omit to do, anything that is or is reasonably likely to confer on itself a benefit or advantage at the expense of a Unitholder or prospective Unitholder.” Rule 12.4.2(2) requires the manager to correct any valuation error as soon as possible and to reimburse the fund for the cost. For a fund structured as an Investment Trust, Rule 12.4.2(3) places a parallel oversight duty on the Trustee.
Rule 12.5 governs pricing. Rule 12.5.1(1) requires the manager to take all reasonable steps and exercise due diligence to price units correctly, and Rule 12.5.1(2) requires the price to be calculated on the basis of the Rule 12.4.1 valuation “in a manner that is fair and reasonable as between Unitholders.” Rule 12.5.2 requires immediate rectification of pricing breaches and notification of the Regulator unless the error is of minimal significance.
Two elements of the regime speak directly to a manager valuing its own fund on a basis that benefits itself. The first is Rule 12.4.2(1)(b), the express prohibition on conferring a benefit or advantage on itself at a unitholder’s expense. The second is the Appendix 4 guidance, which sets “the expected minimum standards of control in relation to the valuation of the Fund Property.” Appendix 4 states that the manager should agree its valuation methodology with the Trustee, Eligible Custodian or other oversight person and apply it consistently (paragraph 5); that where no reliable market price exists an investment should be valued at “a fair and reasonable price,” with the reasons documented and defensible, for example by averaging three experienced brokers’ valuations (paragraph 6(b)); and that the de minimis error tolerance is harder to rely on where errors are “persistent or repetitive, or errors consistently in the Fund Manager’s favour” (paragraph 7).
These are the provisions that discipline the input to a performance fee. A fee that crystallises on a valuation is only as sound as the valuation, and Rule 12.4.2(1)(b) and Appendix 4 are where the rulebook constrains a manager from setting that valuation to its own advantage. Their reach therefore determines how much protection an investor has, and their reach is not uniform across fund types.
For a Public Fund, Chapter 12 applies in full under Rule 12.1.1(1). Rules 12.4 and 12.5 bind the manager, Appendix 4 applies, and Chapter 13 adds an oversight-arrangement layer under which the persons providing the oversight function have duties that expressly reach asset pricing and fund valuation. This is the most heavily governed valuation environment in the regime.
For an Exempt Fund, Chapter 12 also applies in full, so Rules 12.4 and 12.5 and Appendix 4 bind the manager. The difference from a Public Fund is the absence of the mandatory oversight-provider layer, which Chapter 13 confines to Public Funds. An Exempt Fund manager is therefore subject to the full valuation and pricing rules and the Appendix 4 standards, but without a mandated independent oversight function checking its methodology.
For a Qualified Investor Fund, Rule 12.1.1(3) admits only Rule 12.4.1(b) from the whole of the valuation and pricing regime. Rule 12.4.1(a), the documented-policy duty, does not apply. Rule 12.4.1(d), the price-publication duty, does not apply. Rule 12.4.2(1)(b), the anti-self-benefit duty, does not apply. Rule 12.4.2(2), the error-correction and reimbursement duty, does not apply. Rule 12.5, single pricing, does not apply. Appendix 4 does not apply. What survives is the single obligation in Rule 12.4.1(b) to value “at regular intervals as appropriate to the nature of the Fund, market practice and investor expectations,” on terms set by the Constitution or Prospectus. That standard is calibrated to accommodate infrequent and manager-determined valuation, and it is not paired with any of the methodology, independence, or anti-self-benefit controls that operate for the other fund types.
The companion article on performance fees establishes that the Fund Rules impose no structural constraint on a performance fee, no high-water mark, hurdle, crystallisation rule or clawback, and that for a Qualified Investor Fund even the authorisation-and-disclosure control in Rule 12.13.5 is disapplied. The valuation analysis completes that picture on the input side. A performance fee that crystallises on an unrealised valuation depends entirely on how that valuation is set, and for a Qualified Investor Fund the rulebook removes both the structural fee controls and the valuation controls at the same time. The one provision that would otherwise bite, the anti-self-benefit duty in Rule 12.4.2(1)(b), is disapplied for a Qualified Investor Fund by Rule 12.1.1(3).
The consequence, stated as a claim about the Fund Rules rather than about the conduct of any manager, is that in a Qualified Investor Fund a performance fee crystallising on a manager-determined valuation of illiquid assets, with no clawback if the value later reverses, contravenes no provision of FUNDS VER12.290426. Whether such a structure is nonetheless constrained is a question that moves outside the Fund Rules, to the general duty in Rule 12.2, to the negative constraint in Rule 11.1.3(1)(b) that the Constitution contain no provision prejudicial to unitholders generally, to the GEN rulebook, and to what the Professional Client investors negotiate. Reading any of those residual standards onto a specific fee-and-valuation structure is an inference about how a general test would apply, and the Fund Rules text does not resolve it.
The graduated structure is settled on the text: Rules 12.4 and 12.5 in full for Public and Exempt Funds, Appendix 4 for both, the Chapter 13 oversight layer for Public Funds, and only Rule 12.4.1(b) for Qualified Investor Funds under Rule 12.1.1(3), with Appendix 4 confirmed inapplicable to Qualified Investor Funds by the Rule 3.4 table.
Open points are three. The reach of the residual standards for a Qualified Investor Fund, Rule 12.2 and Rule 11.1.3(1)(b), is not resolved by the text. The Appendix 4 minimum standards are expressed as guidance using “should,” which sets a supervisory expectation rather than a binding rule, so the weight given to a departure from them is a matter of how the Regulator applies the guidance rather than a matter the text fixes. And Consultation Paper No. 12 of 2025 proposes streamlined frameworks for smaller and institutional managers; those proposals are indicative and not enacted in VER12.290426, and a second consultation paper affecting the funds framework is planned for 2026. This analysis states the current rules and will require review when those amendments are enacted.
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