BlueBay Asset Management has indicated that the portfolio manager of its Emerging Market Total Return fund, Simon Treacher, has resigned following a “breach of internal valuation policy”. The fund management firm has also made the decision to close the fund as a result of the current market conditions but it stressed that this action was not taken in connection with the breach.
According to BlueBay, the breach had no material impact on the net asset value (NAV) of the fund, which has been suffering due to the deteriorating market conditions resulting in a loss of 53% of its value year to date. However, the firm has not provided details about the breach or how the valuations were altered.
This breach comes against a background of increased regulatory and public scrutiny of the valuations space. For esoteric instruments and products especially, fund managers are being forced to revisit the valuation process to ensure that it is robust. This necessarily involves providing more transparency around the process for investors and defining more valuation controls, if required. An issue has also been made of segregation of duties between the investment decision makers and the valuation function, in order to prevent events such as this breach.