Pricing and valuation is an inherently complex process. Funds are pricing hundreds, sometimes thousands, of instruments in dozens of portfolios. With inputs sourced from multiple market data vendors and broker quotes, this process involves complexities due to the categorization of securities into listed, over-the-counter (OTC), and private assets. While funds have relied on customized spreadsheets to streamline the pricing process, the rise of regulatory scrutiny and the need for transparency has highlighted the limitations of manual approaches. In response, the industry has witnessed the emergence of advanced pricing and valuation solutions, to automate and enhance this crucial aspect of middle office operations.

Managing pricing and valuation entails intricate calculations and meticulous reviews. With limited resources allocated to this task, funds have traditionally employed customized spreadsheets tailored to each category of securities. These spreadsheets help simplify the process to some extent but are time-consuming and prone to errors. As the industry evolves, manual processes are no longer deemed acceptable by regulators, large investors, and allocators, who seek greater transparency and accuracy in pricing.

The Need for Pricing Automation

Recognizing the shortcomings of manual processes, investors have become increasingly concerned about the lack of visibility into the alignment of fees and expenses with the valuation policy document. The Securities and Exchange Commission’s (SEC) Office of Compliance Inspections and Examinations (OCIE) has raised alarms regarding risks associated with this lack of transparency. The OCIE’s risk alert revealed instances where advisers improperly valued assets in client accounts, resulting in overbilled advisory fees. These valuation errors often stem from using metrics different from those specified in client advisory agreements or basing valuations on an asset’s original cost rather than fair market value. Additionally, policy documentation inconsistencies further compound the problem, with advisers failing to adhere to disclosed valuation processes.

Manual pricing and valuation processes are inherently prone to errors and inconsistencies. The complex nature of pricing hundreds or thousands of instruments across various portfolios, coupled with the use of multiple market data vendors and broker quotes, increases the likelihood of mistakes. As funds grow and diversify their portfolios, the manual processes that once sufficed may become inadequate. Handling a larger number of instruments, incorporating new asset classes, or expanding into different markets can strain manual processes and increase the likelihood of errors. Also, pricing teams often spend considerable resources on manual data retrieval, calculations, and reviews, leaving less time for strategic decision-making and value-added activities.

Pricing Automation offers a significant advantage in terms of efficiency, allowing funds to streamline the entire pricing process. With automated data retrieval from vendors and brokers, as well as the application of predefined pricing rules and threshold checks, it enables funds to expedite the process, freeing up valuable time for more critical tasks. Funds can also generate accurate reports, demonstrate adherence to disclosed valuation processes and ensure that fees and expenses align with regulatory requirements.

IVP Pricing and Valuation Automation Solution: Engineered for Pricing Efficiency

IVP Pricing and Valuation Automation Solution offer a comprehensive solution to streamline the complex pricing and valuation process. By leveraging end-to-end automation, this innovative solution addresses the challenges faced by funds, enabling them to retrieve data efficiently from vendors and brokers. Through the application of waterfall pricing rules, it ensures adherence to specific threshold checks, resulting in accurate and reliable prices. The system seamlessly integrates with leading pricing data vendors and brokers, offering a flexible and configurable pricing engine that can accommodate any type of pricing process.

Automating the pricing process significantly reduces the time and effort spent by pricing teams on manual calculations and reviews. This efficiency boost allows funds to allocate resources more strategically, focusing on higher-value tasks and analysis rather than mundane administrative work. Moreover, with the ability to retrieve data directly from vendors and brokers, the solution minimizes the risk of data entry errors, ensuring greater accuracy.

IVP Pricing and Valuation Automation Solution address the growing demand for transparency and compliance by providing a comprehensive audit trail of the pricing and valuation process. Funds can now demonstrate adherence to regulatory requirements and internal policies, mitigating the risk of incorrect valuations and resulting overbilling. The solution aligns pricing practices with disclosed valuation processes, ensuring that fees and expenses are accurately reflected.

It also provides a highly configurable pricing engine. This flexibility enables funds to tailor the solution to their specific pricing processes, accommodating unique requirements and pricing rules. By providing a customizable framework, the pricing solution empowers funds to maintain control over their pricing and valuation practices while minimizing errors and inconsistencies.

Learn more about IVP Pricing and Valuation Automation Solution,  or contact