Glossary · Operations
Reconciliation
Reconciliation is the process of comparing records from two or more sources, such as internal books and custodian statements, and investigating and resolving differences.
In fund operations, reconciliation compares the fund’s internal records against independent external sources. Common types include cash reconciliation (books versus bank and broker statements), position reconciliation (books versus custodian or prime broker holdings), trade reconciliation (books versus broker confirmations), and NAV or P&L reconciliation (manager’s books versus the administrator’s).
Each unmatched item is a break. Breaks are categorized (timing, pricing, missing trade, corporate action, fee or mapping), assigned an owner, aged and resolved. A break-aging report shows how long items remain open and is a key control metric reviewed by operations management and, often, by auditors and investors during due diligence.
Pitfalls include auto-matching rules that are too loose and hide genuine errors, clearing breaks with plugs rather than root-cause fixes, and reconciling only at month-end so problems accumulate. Daily reconciliation with documented resolution and maker-checker review is the institutional standard. See also three-way reconciliation.
Related terms
Where this comes up in our work
Reconciliation
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