Fair Value Pricing is high on the fund management agenda as an increase in market volatility and a reduction in liquidity have combined to make accurate pricing of portfolios more than usually difficult.
Investit have been tasked by the membership of Investit Intelligence, made up of 22 investment managers and Third Party Administrators, to investigate sound practices in pricing securities, property, OTC derivatives contracts and whole portfolios. The Investit team will consult depositaries, trustees, data providers and regulators as well as the Intelligence membership with the aim of developing a set of sound practices. Accurate pricing is vital to understanding the value and performance of portfolios. Fair Value Pricing is both the aim of the normal approach to valuation and the formal name given to the special procedures invoked to cope with ‘hard to value’ items or whole portfolios in times of market stress.
The Investit Fair Value Pricing paper will define the priority issues, describe current approaches and set out practical sound practices that the Intelligence membership support. The member-panel representatives come from:
– Aviva Investors
– AXA Investment Managers
– Baillie Gifford & Co
– Gartmore Investment Management
– Henderson Global Investors
– Hermes Fund Managers
– HSBC Global Asset Management
– JP Morgan Investor Services
– Northern Trust Company
– Northern Trust Global Investments
– Old Mutual Asset Managers
– State Street
Fund managers are required to provide a fair valuation of their clients’ assets, whether in segregated accounts or any of the wide range of pooled vehicles, from unit trusts to hedge funds. Fair Value Pricing is particularly important for pooled funds as the interests of existing clients must be reconciled with those buying or selling units.
The full results of the research will be published in an Intelligence paper in February 2009. Early findings will be presented at the next Investit Intelligence Winter Conference on Thursday 29 January in London. Richard Phillipson, principal and Investment Practice Head at Investit said – “Fund managers and Third Party Administrators feel a need to investigate policy and implementation for Fair Value Pricing. Recent market events have caused this issue to rise to the top of the agenda and this initiative, driven by the investment community, clearly demonstrates a determination to treat clients fairly.”
