Fund Management Fair Valuation Best Practices
Capital market disruptions are becoming quite common and their impact on fund managers can no longer be taken lightly. During the Inaugural Asia Investment Management COO Roundtable organized by stradegi in 2016, COOs agreed that market disruption and its consequences on valuation, i.e. not having readily available or reliable market prices to value funds, usually lead to an operational “crisis management mode” placing a high risk on the firm and its investors. For instance, during mid-June 2015 and again during the first week of 2016, the Chinese market crisis caught asset managers by surprise and the lack of regulatory guidance aggravated the challenge of fairly valuing funds holding Chinese stocks. While it may not be possible to predict when and where the next market disruption will happen, asset managers are fully aware that it is only a matter of time and hence they are taking steps to be as prepared as possible for the next such event.
The intention of this paper is not to review or evaluate how asset managers responded to previous market disruptions. The objective rather, is to gain an understanding of different practices at various asset managers and document best practices from such events so that asset managers can be better prepared during future market disruptions.
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