May 01, 2008
Download Hedge fund pricing has always been, at best, a highly inconsistent and unreliable process. The hedge fund industry has never been required to adopt a standard policy for valuing securities, especially the private, illiquid, and over-the-counter asset classes. However, recent market volatility and mounting pressure from institutional investors has forced hedge fund managers to focus on the adoption of a standardized pricing and valuation methodology. More recently, the issue of pricing and valuation has escalated to Washington. The root cause of the pricing and valuation dilemma within the hedge fund industry is the lack of any consistent pricing standards. Despite numerous methods of valuation and the existence of sophisticated pricing models, there remains a high degree of variance in the application and selection of pricing methodologies amongst hedge fund managers.