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Shadow NAV Accounting

shadow accountingAccording to many industry surveys over the years, it has become clear that institutional investors require that a fund manager have a proper shadow NAV accounting process in place.  This is to ensure that the official NAV generated by the fund administrator is without error and greatly reduces the chance of a NAV restatement.   Administrators perform a highly valuable service in producing the official NAV, but occasionally mistakes do occur no matter how impressive the technology and processes utilized.  By having the Administrator and Shadow NAV Accounting provider proactively engage in independent cross-checking, NAV errors are greatly mitigated and NAV delivery times quickened.     

Running a Shadow NAV process in-house can be costly.  However, such costs can be greatly reduced if this process it outsourced to a reputable 3rd party such as Linedata QRMO. Linedata QRMO, with over a decade of experience across multi-strategy cross asset managers will provide the following suite of “high touch” services to ensure your firm is not only meeting but excelling when it comes to “best practices” in Shadow NAV Accounting:

  • T+1 Shadow NAV
    • Subscriptions/Redemptions
    • Trade Related:

Trading PnL Across Attributions

  • Fees and commissions
  • Financing Fees
  • Market Values of securities
  • FX Snaps
  • Trade relate accruals such as coupons and dividends
  • PPM Valuation Hierarchy followed
    • Non Trade Related Items:

         - Audit Fees

         - Legal Fees

         - Administrative Fees

         - Management Fees

         - Performance Fees

  • NAV Reconciliation Against the Administrator
    • Master & Feeder Reconciliation
    • Line by Line reconciliations for positions, cash, fx snaps, valuations, accruals
    • Full explanations for any discrepancies
    • NAV differences explained to within a few basis points
    • Turnaround times in as little as 2 or 3 days

We’ve built up the fund like a managed Account. QRMO acts as risk monitor and is responsible for generating the daily shadow NAV as well as controlling the risk guidelines similar to the processes used for a managed account platform set up

 

Jean-Marie Barreau, COO - Triada Capital