About a-team Marketing Services
The knowledge platform for the financial technology industry
The knowledge platform for the financial technology industry

A-Team Insight Blogs

Interactive Data Survey Highlights Importance of Fair Value Practices During Volatile Markets

Subscribe to our newsletter

Interactive Data Corporation, a leading provider of independent pricing and valuation services, today announced key findings from its recent survey of mutual fund firms on fair value procedures for international equities.

The survey findings revealed that using “triggers” to invoke fair value procedures continues to be a common practice for mutual funds. These triggers may be employed every day or dependent upon certain movements in one or more relevant benchmark proxies. The various fair value strategies observed suggest a variety of opinions amongst funds as to what constitutes a significant event to trigger the application of fair value adjustments to local closing prices.

Interactive Data received responses from 134 industry professionals, including CFOs, CCOs, and valuation team members, representing 111 mutual fund firms.

“The heightened level of volatility in the market draws attention to the importance of fair value practices for mutual funds investing in international equities,” said Rob Haddad, director, Evaluated Services for Interactive Data. “Our survey found that mutual funds are generally well-prepared for volatile market scenarios, with predefined fair value procedures in place to handle such events, and formal back-testing processes to examine how these procedures worked in practice.”

Approximately 36% of funds responded that they are invoking fair value procedures every day (0 bps trigger), compared with only 10% of respondents from a fair value survey Interactive Data conducted in 2004. The remaining 64% of funds from the 2011 survey indicated that they use a systematic process that incorporates movements in relevant benchmarks to “trigger” the use of a fair value procedure.

The survey also found that mutual funds widely use triggering strategies that include a single benchmark proxy (e.g., the S&P 500 Index). However, the responses also indicated that more complex triggering strategies are increasingly being utilized. These include the use of multiple trigger levels depending on portfolio composition or time zone (e.g., funds investing in European equities vs. Asian equities), dynamic trigger levels, and multiple trigger levels and/or multiple benchmarks as a basis for triggers.

Approximately 92% of respondents also indicated that they systematically and regularly review back-testing performance data. This could include simulating the use of fair valuation processes for a number of portfolios at various trigger levels historically.

Interactive Data’s Fair Value Information Services are designed to provide subscribers with various information that can be used to estimate a price for an exchange-traded equity security, equity index futures contract, or equity option that would likely prevail in a liquid market, in view of market information available at the time of evaluation.

Subscribe to our newsletter

Related content

WEBINAR

Upcoming Webinar: How to maximise the use of data standards and identifiers beyond compliance and in the interests of the business

Date: 18 July 2024 Time: 10:00am ET / 3:00pm London / 4:00pm CET Duration: 50 minutes Data standards and identifiers have become common currency in regulatory compliance, bringing with them improved transparency, efficiency and data quality in reporting. They also contribute to automation. But their value does not end here, with data standards and identifiers...

BLOG

S&P Global to Acquire Data and Analytical Solutions Specialist Visible Alpha

S&P Global has reached an agreement to acquire Visible Alpha, a provider of industry and segment consensus data, sell-side analyst models and analytics from high-quality, exclusive sources. The acquisition will create a premium offering of fundamental investment research capabilities on S&P Global Market Intelligence’s Capital IQ Pro research and analysis platform. Visible Alpha provides consensus...

EVENT

ESG Data & Tech Summit London

The ESG Data & Tech Summit will explore challenges around assembling and evaluating ESG data for reporting and the impact of regulatory measures and industry collaboration on transparency and standardisation efforts. Expert speakers will address how the evolving market infrastructure is developing and the role of new technologies and alternative data in improving insight and filling data gaps.

GUIDE

Regulatory Data Handbook 2023 – Eleventh Edition

Welcome to the eleventh edition of A-Team Group’s Regulatory Data Handbook, a popular publication that covers new regulations in capital markets, tracks regulatory change, and provides advice on the data, data management and implementation requirements of more than 30 regulations across UK, European, US and Asia-Pacific capital markets. This edition of the handbook includes new...