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How Automation Is Reshaping Asset Pricing and Valuation

In fast-paced and ever-evolving markets, funds must manage the pricing and valuation of diverse assets across numerous portfolios, drawing on inputs from diverse a wide range of data vendors and broker quotes. Assets are typically classified as listed, over-the-counter (OTC), or private securities. The pricing team shoulders the responsibility for computing daily, monthly, or quarterly prices.

A typical pricing process involves connecting with pricing data vendors and brokers, meticulously examining market data, and applying the fund’s valuation policy, which may include pricing waterfall rules and exception management. However accurate pricing also involves overcoming inefficiencies and other challenges under time pressure to declare net asset value (NAV). Determining the value of portfolio positions is of course pivotal for month-end valuation and critical for computing NAV.

Despite the significance of these calculations, a surprising number of funds continue to execute these procedures manually using spreadsheets. In this blog, we will explore why pricing automation offers a much more efficient pricing process.

The Need for Automation in Pricing and Valuation

In an era when accuracy and efficiency are paramount, traditional manual methods of pricing and valuation are proving to be increasingly inadequate. While spreadsheets offer some degree of simplification, they are time-intensive and susceptible to errors. Funds also struggle to handle vast amounts of data, apply complex pricing rules, and ensure compliance with stringent valuation policies. In addition, pricing portfolio positions involve a multifaceted process that combines data collection, application of pricing rules, and threshold checks.

These efforts are far from straightforward. As markets experience higher trade volume and volatility, pricing and valuation teams are under immense pressure to value securities accurately. Regulatory bodies and investors now demand greater transparency and precision in pricing and valuation practices.

The complexity is magnified when funds must manage pricing for a sizable number of illiquid instruments across numerous portfolios. Collecting data from multiple pricing sources adds another layer of intricacy. The application of waterfall pricing rules and threshold checks makes the process even more complicated and error-prone. This is where the power of automation comes into play, offering a streamlined approach to the pricing and valuation process.

 How Automation Transforms Asset Pricing and Valuation

Switching to a pricing and valuation automation solution can make a huge difference. Firms with a predominantly manual pricing process will recognize four important advantages:

  1. Higher Efficiency in Daily Operations: One of the immediate impacts of pricing automation is the significant boost in efficiency. With algorithms handling data retrieval, rule application, and pricing threshold checks, the entire process becomes streamlined and error-free. Greater efficiency translates into a shorter timeframe for acquiring prices, leading to faster overall pricing cycles.
  2. Enhanced Exception Management: Pricing automation bolsters exception management practices within pricing and valuation teams. The ability to apply waterfall pricing rules and conduct threshold checks automatically ensures that potential risks can be identified and addressed proactively. This is a crucial aspect in any environment where market dynamics may introduce unforeseen challenges.
  3. Support for Diverse Asset Classes: Unlike manual processes that may falter with exotic asset classes or highly illiquid securities, automated systems excel at handling a diverse array of instruments. The flexibility and configurability of automation solutions enable pricing and valuation teams to adapt seamlessly to the unique requirements of various asset classes.
  4. Seamless Integration With External Sources: Integration with leading pricing data vendors, brokers, and market specialists creates a seamless bridge between internal processes and external pricing data. This connection ensures pricing teams have access to the most accurate and up-to-date information, mitigating challenges associated with obtaining quotes from multiple sources.

How IVP Can Help

Adopting a pricing and valuation automation solution can be an important strategic move for buy-side firms seeking to gain a competitive edge. Automation not only addresses the most common pricing challenges but can unlock new levels of efficiency and insights. Efficiencies gained through streamlined processes, accurate valuations, and consistent pricing delivery help funds publish alpha transparently.

The IVP Pricing and Valuation Automation Solution is a comprehensive, end-to-end platform that streamlines the entire pricing process from data retrieval to rule application and pricing tests. It gathers data from diverse sources, applies waterfall pricing rules, and conducts threshold checks — even for highly illiquid securities and exotic asset classes. It also connects to all leading pricing data vendors and brokers and uses a configurable pricing engine that meets the unique needs of any pricing process.

Learn more about the IVP Pricing and Valuation Automation Solution or contact to set up a live or online demo.

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Pricing and Valuation Automation Solution

This solution provides pricing and valuation automation, connecting funds to leading pricing data vendors and brokers. It also provides a flexible, configurable pricing engine that caters to any pricing process. IVP’s solution is designed to automate and streamline the pricing and valuation process, which traditionally involves time-consuming tasks like data collection, rules application, and pricing tests, efficiently retrieving data from vendors and brokers, applying waterfall pricing rules, and ensuring that prices meet threshold checks. This includes handling highly illiquid securities and those from exotic asset classes.

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