About Hedge Fund Valuation and Performance Reporting

by: Susan Mangiero, CFA

According to "Offshore hedge fund is trouble for Seattle's pension fund" by Rami Grunbaum (Seattle Times, April 11, 2010), the Seattle City Employees' Retirement System ("SCERS") got a nasty surprise when it asked again for overdue financial information about a hedge fund in which it had invested. According to various records, the U.S. Securities and Exchange Commission has similar questions about "true" value versus reported performance numbers.

Contacted by deputy news editor Grunbaum for a general comment about hedge fund valuation and performance reporting, I stated that

Pension trustees shouldn't allow hedge funds to hide behind a veil of secrecy

and that

If a hedge-fund manager is unwilling to explain their valuation process - and related procedures and internal controls - run, do not walk for the nearest door.

If you missed some of my earlier writings on the important topic of valuation, I've included several items below:

  • "September 11, 2008 Testimony - Presented to the U.S. Department of Labor, ERISA Advisory Council Working Group on Hard to Value ("HTV") Assets" - Note that Pension Governance, LLC is now part of Investment Governance, Inc.

  • "Hedge Fund Valuation: What Pension Fiduciaries Need to Know" (Journal of Compensation and Benefits, July/August 2006).

Disclosure: No positions