Fund management advisory firm Carne Global Financial Services has launched its Hedge & Traditional Fund Valuation ‘Best Practice’ Product, which is aimed at assisting hedge fund, private wealth and traditional asset managers in following valuation best practice across all asset classes and products.
Carne Global claims that these best practices will help fund managers to deal with increasing risk and complexity of the valuation process, particularly with complex and illiquid instruments. It is a tool for improving transparency in fund governance, says the advisory firm, and it encompasses valuation policy, terms of reference for valuation committees and marketing summaries.
Sunil Chadda, head of alternative investments at Carne Global, explains: “The high levels of innovation in the hedge fund industry, and the continuing search for alpha across different asset and instrument classes, mean that the challenge of valuation is only going to increase. Carne’s Hedge & Traditional Fund Valuation ‘Best Practice’ product goes a long way to simplifying the process and improving controls and transparency – issues of critical importance to investors and the continuing development of the industry.”
The product incorporates the recommendations of the UK’s Hedge Fund Working Group (HFWG)/Hedge Funds Standards Board (HFSB) and the US President’s Working Group, the European Funds and Asset Management Association (EFAMA), the International Organisation of Securities Commissions (IOSCO) and accounting standard FAS 157. Once the product and any subsequent recommendations have been implemented, managers will be able to claim compliance with the HFWG recommendations on valuation, Carne Global says.
The valuation product focuses on either a specific fund or the manager’s entire fund range and analyses the holdings and the key risks involved, with an emphasis on complex and illiquid instruments. It documents how the administrator and manager each price the portfolio, as well as how and where counterparty, prime broker and third party prices are used, while also addressing issues around side pockets.
Carne Global’s product is aimed at allowing the clear identification of pricing roles, responsibilities and segregation and the identification of pricing sources. It also includes the identification of levels of price validation and tolerances, as well as of pricing weaknesses and associated mitigations. It defines controls and reporting procedures and allows for the reporting to asset manager valuation committees and boards.
