Due Diligence on Valuation: IAFE Comment Period Closing

The body of the report is a list of questions that investors should ask managers in the context of due diligence and that managers periodically should ask themselves. The questions fall into 12 general categories, concerning: the controls a firm employs to promote correctness and integrity in its valuations; checks and balances in the marking of the portfolio; the specific individuals with oversight responsibility for pricing; the valuation procedures; the valuation committee; reliance upon pricing services; identification and monitoring of events that could have effect on value; pricing overrides; stale pricing; fund of funds managers–how do they ensure that they’re receiving correct prices from their underlying funds?; issues relating to debt securities; and procedures of the auditors and/or outside administrators.

The IAFE created its investor risk committee in 2000. It is composed of fund managers, institutional investors, fund of funds managers, regulators, prime brokers and others active in the fund arena. Earlier documents prepared by the IRC address the issue of the right level of disclosure and transparency for funds.

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