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Daily Valuation, Outsourcing Among Trends Seen by BofNY Executive

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NEW YORK (–There is a move among hedge funds from monthly valuation of the portfolio, long the standard in the industry, to daily valuation of assets, said Jeffrey Bieselin, senior vice president at the Bank of New York.

This trend is limited, however, to portfolios that primarily consist of listed or otherwise easy-to-price securities. Daily valuation is very costly for instruments that are hard to price, like distressed debt, and the benefit is insufficient to justify this cost, Mr. Bieselin explained.

He was describing the outlook for hedge fund administration, speaking at a press conference. Outsourcing of middle- and back-office functions, over and above the services administrators have traditionally provided, is another development he identified.

A third trend is the growing importance of funds of funds, which are becoming a larger market for administrators as their assets burgeon with the inflow of institutional money. Funds of funds have different needs, requiring new capabilities in administration.

The convergence of long-only asset management with hedge funds is having a major affect on fund administrators, according to Mr. Bieselin. Integrated management companies want services that satisfy their investor base, he said.

Institutional investors, with their emphasis on issues such as realistic valuation and custody of assets, are behind most of these changes. As they come to play a larger role in the industry, previous practices that were acceptable when high-net-worth investors dominated are no longer sufficient.

Mr. Bieselin expects large institutional clients to favor big administrators that are part of a bank and push funds in that direction. Not surprisingly, he feels BofNY’s administration group, responsible for nearly US$50 billion in hedge fund assets, is well positioned to take advantage of the shifting landscape.

Contact Bob Keane with questions or comments at [email protected].


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