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By Kirsten Bischoff, Opalesque New York:
As the illiquidity crisis of 2008 cycled through a larger global financial crisis and actions were taken to assist the markets, some of the difficulties in securing valuations eased. In that time, many funds have adopted best practices of securing valuations via third party and sometime via multiple sources. However, the markets are still occasionally wreaking havoc on managers’ abilities to secure accurate valuations, and the questions that arise in doing so have not all been answered.
As independent directors of hedge funds, dms Management has witnessed some of the various valuations challenges that have appeared over the past year. “There are new guidelines, [including] which assets go into which buckets, making the right decisions about Level 1, Level 2, Level 3 assets and getting the boards involved with that and checking if all those decisions make sense,” says Don Seymour, Managing Director at dms Management.
During the Opalesque Roundtable (report accessible here: Source) held in the Cayman Islands, Seymour talked about a recent problem a fund had while seeking the true valuation of a bond.
- A bond was estimated to be valued at 60,
- The service provider pushed the dealer for a bid,
- The dealer replied they would only bid 25, but still estimated the value at 60,
- Research showed the dealer held the sa...................... To view our full article Click here
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