During the pricing cycle, asset managers receive prices from multiple vendors and brokers as well as quotes from their internal desk, especially for hard-to-value securities. These quotes are used to price securities based on waterfall hierarchy and also as a reference to compare with other broker-dealer quotes. While quotes are sent by vendors and broker-dealers, the responsibility is on the fund manager to ensure accuracy in the pricing process and to report the valuation of the securities to their valuation committee and investors.
As a part of the due diligence conducted during the pricing cycle, fund managers – especially credit fund managers – compare the deviation of quotes received from various sources with their desk and primary/secondary sources. If the deviation exceeds the set threshold, managers tend to collate these outlier quotes and request a revised price from that source, essentially initiating the “challenge” process. Doing price comparisons between the quotes received for each security, identifying the outlier marks and finalizing the possible candidates that need to be challenged is an effort intensive activity and usually requires a dedicated manual effort during the pricing cycle, unless the firm has a pricing tool in place to intelligently automate the process.
After the quotes that need to be challenged are decided, challenge emails are sent out to their respective sources and in some cases, dedicated portals are used to load the challenged prices. Once the pricing source sends the revised quote, the pricing spreadsheets are updated manually and the security prices are refreshed to reflect the latest marks.
As a whole, the challenge and marks revision process is time-consuming. Due to the level of manual effort required, it calls for a tool that uses intelligent logic to identify outlier quotes automatically and has a well-designed, inbuilt module for tracking price challenges along with their revised marks.
IVP Pricing and Valuation Automation Solution enables funds to take the complexity out of the pricing and valuation process. Providing funds with end-to-end automation, this solution efficiently retrieves data from vendors and brokers, applies waterfall pricing rules and ensures that prices meet their respective threshold checks. Connected to all leading pricing data vendors and brokers, IVP Pricing and Valuation Automation Solution provides a flexible and configurable pricing engine that caters to the needs of any type of pricing process.