With scandals surrounding incorrect portfolio valuations on the increase, an independent set of eyes is vital to maintaining investor confidence
Are the portfolio figures and net asset value numbers churned out by hedge fund managers to justify their management and performance fees and attract new investors worth the paper they are written on? When OTC derivatives or other illiquid assets are involved, the answer, it seems, is 'no'.
To make a complicated job even more so, the vast majority of US onshore LP funds value their own portfolios. Only about 30% use third-party administrators and there is a suspicion that many of these are only getting an 'NAV lite' service, which involves the administrator rubber-stamping the numbers supplied by the fund.
General concerns about the valuation of hedge fund portfolios and the calculation of NAVs have been fuelled, in part, by a number of recent scandals involving false valuations which are...