These days, the Investment Managers opt for third-party services to get their Fund Net Asset Value (NAV) calculated. Authenticity of the evaluation is carried out by an in-house Shadow NAV Administrator whose duty involves reconciling the data against that of the broker or prime custodian. These fund administrators are well-versed in different ways to evaluate the NAV, however, before posting the official Net Asset Value, the final confirmation from Investment Manager is also needed. Well, all that’s great, but why is there a need to get the data reconciled by shadowing the fund administrator? This blog will clear all the doubts with some leading reasons that will make you hire the one.
Introduction to Shadow Accounting
The Shadow Accounting is a comprehensive methodology to maintain an additional set of financial records to compare it with the third-part fund administrator. Shadowing the fund administrator helps in providing precise and accurate data. Besides, shadow accounting facilities the real-time analytics and flexibility to determine their own schedules.
Reasons that influences managers to hire the Shadow NAV Administrator
1. Sorts out the pricing errors and provides accurate valuation
An inaccurate asset pricing often leads to market value discrepancies. The most prominent reason being, the data used by Investment Manager and the prime broker sometimes lacks authenticity or they might use the data from different resources. Additionally, having another set of books allows the administrator to add-on to the portfolio with a new pricing and valuation strategy. To conclude, the shadowing will help the hedge fund managers to make a well-informed decision while valuing the investment.
2. Facilitates the speedy reporting
Shadow NAV Administrator can maintain their own set of records which further helps to facilitate the reporting requirements of senior management. On the other hand, the third-party administrators are bound to follow the service level agreements due to which they can’t meet the expectations of senior management to offer prompt reporting. Maintaining the alternate book of records allows the administrators to provide real-time information on the current status.
3. You get a holistic view of funds from different perspectives
Having a shadow accounting leads to reporting the strategies from multiple perspectives providing holistic previews of the performance. Hiring a NAV administrator is also important from the perspective of providing the accurate calculation to get investors so that their trust could be sustained.
4. Because investors prefer to have a shadow accounting
Some investors and allocates strongly recommend the presence of Shadow NAV administration to shadow their funds' evaluation. Having the one leaves a positive impact on the investors and provides the due diligence reports as well. Shadow accounting also becomes important to take a competitive lead by showing the increased controls.
5. Provides a clear picture of assets
With the introduction of the latest regulatory requirements, the investment managers have to maintain a consolidated and precise picture of their assets. The best example is Form PF, which includes the statistics like gross derivative positions notional value, investor concentrations across multiple portfolios, etc. By shadowing the accounts and records the process of verifying the data and populating the accounts becomes quite simple.
Ascent Fund Services – Your Trusted Shadow NAV Administrator
Hedge funds get vital autonomy with an accurate shadow accounting. With that, the data verification and rectification becomes quite simple. Moreover, the error can be identified at an early stage much before the situation gets severely complicated. For more information on shadow accounting,
Real Estate Investment Funds, and hedge funds, you can contact the ASCENT Fund services and get the expert’s on the job.
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