Independent Valuations
There is considerable investor and regulatory concern about the valuation of OTC derivatives. This is understandable considering the inherent difficulty of valuing complex or illiquid assets, and the potential conflict of interest between the fund manager and investors.
Two research papers have been recently published :-
- AIMA - Guide to Sound Practices for Hedge Fund Valuation – March 2007
- IOSCO - Principles for the Valuation of Hedge Fund Portfolios – March 2007
AIMA advocates the use of a “suitably independent, competent and experienced Valuation Service Provider”. IOSCO recommends that “an appropriately high level of independence is brought to bear” in all valuations, by advising the "comparison of counterparty or manager prices to a recommended independent source such as a Valuations Agent."
Portfolio Valuations Service Provider
Markit is a Valuations Agent and meets the requirements highlighted in both papers. We use unique and market-leading consensus data and proprietary models, carefully and accurately calibrated to market levels, to offer daily, weekly or monthly valuations of fund portfolios. Our service has automatic uploads, downloads and real-time input validation. Markit reduces error rates and the time it takes to publish NAV by employing a team of expert analysts who are available to discuss any discrepancies or questions about individual valuations. We work both directly with funds or indirectly via fund administrators.
Markit is able to offer a free coverage check on your derivative portfolio. Please contact us for details or for access to the research papers.