Glossary · Fund Accounting
Mark-to-Market (MTM)
Mark-to-market is the practice of valuing positions at current market prices at each valuation point, recognizing unrealized gains and losses in the fund’s results.
Under mark-to-market accounting, a fund revalues its holdings at each NAV date using prices from its pricing hierarchy. The difference between current value and cost (or prior value) is recorded as unrealized gain or loss, so NAV reflects what the portfolio is worth today rather than what it cost.
For derivatives and margined positions, mark-to-market also drives cash. Daily variation margin on futures and collateral calls on OTC derivatives are based on MTM values, so accurate marks affect liquidity as well as reported performance. Where no market price exists, funds use mark-to-model approaches, which fall into Level 2 or Level 3 of the fair value hierarchy.
Pitfalls include stale marks on thinly traded instruments, inconsistent valuation times across asset classes, FX rates taken at a different time from security prices, and model marks without independent review.
Example
A fund buys 10,000 shares at $50.00. At the next valuation point the closing price is $53.00. The position is marked at $530,000, and the fund records an unrealized gain of $30,000.
Related terms
Where this comes up in our work
Valuations & Pricing
A NAV is only as good as the prices in it. Fundtec’s valuations team sources, compares and challenges prices every day, and documents why each mark…
Read more →Investment OperationsMiddle Office
The middle office turns investment decisions into a clean, reconciled record the administrator, auditors and investors can rely on. Fundtec runs it…
Read more →Tell us where your operations need to be in twelve months.
A 30-minute scoping call with our team. You leave with a clear view of scope, transition timeline and indicative pricing.