Tag Archives: hedge fund valuation

Hedge Fund Best Practices – Full Report

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Full Report of Best Practices for the Hedge Fund Industry

As we discussed in an earlier article on Hedge Fund Best Practices, the President’s Working Group outsourced the creation of best practices for the hedge fund industry.  The report below, reprinted in its entirety, provides a comprehensive review of the major issues which hedge fund managers should be aware of when they are establishing their business.  I personally believe that all of the best practices below are reasonable and will, over time, become standard within the industry.

The report is broken up into five sections: (1) valuation, (2) risk management, (3) risk management, (4) trading and business operations, and (5) compliance.  Because the report is so long we will be providing a daily detailed analysis of each section. If anyone reads through the report and has comments, we would be happy to publish those comments as well.  Continue reading →

SEC Stands Behind “Fair Value” Accounting

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FASB may re-evaluate FAS 157 in light of recent market events

While the SEC does not directly control the manner in which hedge fund assets are valued for the purpose of striking a NAV for a fund, the SEC valuation policies are important for hedge funds in a number of different ways.  Maybe most important is that the SEC valuation guidelines require issuers of securities to adhere to certain valuation practices with regard to their own assets.  Recently Congress mandated the SEC reevaluate its valuation guidelines in light of the market collapse of 2008. Continue reading →

Can a hedge fund value its own assets?

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Hedge Fund Questions

For the new year we will publish a list of common questions we receive from our readers.  This question involves hedge fund valuation.

Question: Can a hedge fund provide its own valuation?

Answer: Generally yes, provided that the hedge fund offering documents state that the valuation of the hedge fund’s assets will be conducted by the fund – more specifically by the hedge fund’s management company.  In many hedge fund documents a provision which allows a manager flexibility in valuation is standard – although, it is likely that these normally nebulous provisions will become more specific as institutional investors require greater specificity in the offering documents. Continue reading →