Purpose This paper aims to present the rules for determining the net asset value according to the AIFM Directive which have fundamentally changed regulation of the European alternative funds industry. The paper discusses how these rules must be applied to ensure a reliable and objective valuation and to protect the interests of investors. Design/methodology/approach The paper draws upon experience gained in the market following the implementation of rules on fund valuation in the European Union in 2011 and further in Germany in 2013. The valuation rules for relevant asset classes are presented and discussed in the light of the overarching goal of investor protection. Findings The paper’s findings show that the market participants saw the increased requirements as an opportunity and that they have adapted to the new system. This also applies to fund valuation, even though some people criticise terminology, lack of clarity and the complexity of the new valuation scheme from a practical perspective. Also, due to the increased valuation requirements, a consolidation among market participants can be expected. Originality/value The issues addressed in the paper are currently the subject of debate by regulators and market participants. There are direct implications for future prudential regulation in the asset management industry.