Such firms cannot delegate their accountability for releasing timely and accurate NAVs, even if they delegate responsibility for NAV production. In Europe, UCITS and AIFMD require Asset Managers and ManCos to implement Business Continuity Plans (BCP). The lack of suitable backup alternatives can leave you exposed to several forms of risk.Ĭompliance risk: Firms increasingly face regulatory mandates to ensure accurate, up-to-date NAV calculations. Few Asset Managers, outside hedge funds investing in illiquid assets, choose to do this given the current regulatory environment. This is the most accurate approach but is also labor-intensive and costly. Shadow NAV solutions involve maintaining a duplicate book of records. They enable you to issue an accurate, updated NAV even if your supplier suffers an outage. They increasingly present an unacceptable level of operational risk.īenchmark NAV solutions (also known as Indicative or Backup NAV) calculate an estimated NAV using algorithms to examine a comparable index and perform a ‘top-down’ statistical analysis that approximates market, currency, derivatives, fees and other impacts, with varying levels of accuracy.Ĭontingent NAV solutions start with the prior NAV and independently process and produce the data factors that drive changes to your NAV. Spreadsheets represent a low upfront cost but are complex to maintain and control. Available optionsīroadly speaking, there are four main ways of calculating an alternative NAV to the one provided by your fund administrator or fund accounting department: Not all solutions are created equal, however, so it is important to educate yourself to select the right fit for your business.
Market volatility in the wake of COVID-19, and the widespread remote working that has followed, have further underscored the challenges posed by outdated, manually based oversight and contingency processes.Īs regulators take a harder look at operational resilience, offshoring and related risks, and the robustness of Business Continuity Plans, vendors have inundated the market with products claiming to help Asset Managers and Management Companies streamline NAV Oversight and perform Contingent NAV calculations. In recent years, NAV delivery failures by fund administrators have highlighted the legal, financial, and reputational risks inherent in outsourcing NAV production.
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