Investment Operations
Fund valuations, pricing and independent price verification
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 is right.
In one minute
Fund valuation and pricing is the process of sourcing, validating and documenting the prices used to value a fund’s positions, following a written pricing hierarchy and the fair value hierarchy under ASC 820 or IFRS 13. Fundtec provides valuations and pricing support for hedge funds, private credit and asset managers: multi-source price reconciliation, independent price verification, Level 3 mark support and a documented price challenge process.
Managers whose desk, administrator and investors need to see the same numbers, and whose middle office has outgrown spreadsheets or a stretched in-house team.
A 30-minute scoping call, then a written plan: scope, the transition timeline and indicative pricing. No generic proposal.
Why fund pricing needs an independent process
Most funds have more than one price for the same instrument on the same day. The desk has a view, the portfolio management system pulls a vendor feed, the administrator uses its own source and a Bloomberg screen may show something else. If nobody reconciles them before NAV, the difference shows up as a surprise in performance, an audit finding or an investor complaint.
Fundtec’s valuations and pricing service, part of our middle office, puts a documented process around this. We apply the fund’s pricing hierarchy, compare every source, investigate exceptions and escalate anything the manager must decide. The valuation remains the manager’s responsibility; our job is to make it defensible.
Price sources compared
The sources Fundtec reconciles on each valuation date, and what a difference between them usually means.
| Source | What it represents | Typical reason for a difference |
|---|---|---|
| Trading desk / portfolio manager | Front office view of executable level | Stale mark, trader bias, level taken at a different time |
| PMS / OMS vendor feed | Automated price from the configured vendor | Wrong source mapped, feed failure, corporate action not applied |
| Fund administrator | Price used in the official NAV | Different vendor or hierarchy, different snapshot time |
| Market data terminal (e.g. Bloomberg) | Composite or specific dealer quote | Composite vs single-dealer, bid vs mid convention |
| Broker or counterparty quotes | Indicative or executable dealer level | Illiquid market, wide bid-ask, quote age |
| Third-party valuation agent | Model-based fair value for Level 3 | Model inputs, discount rates, comparable selection |
The fair value hierarchy under ASC 820 and IFRS 13
Both standards classify fair value measurements by the observability of their inputs. Fundtec maps every position to a level and records the evidence.
- Level 1
- Quoted prices in active markets for identical assets, such as listed equities and exchange-traded futures
- Level 2
- Observable inputs other than Level 1 quotes, such as many corporate bonds, FX forwards and vanilla swaps
- Level 3
- Significant unobservable inputs, such as private loans, private equity stakes and bespoke structured products
- Reference
- US GAAP: ASC 820 Fair Value Measurement. IFRS: IFRS 13 Fair Value Measurement. See fair value hierarchy
How independent price verification works
Collect
Prices are gathered from every configured source at the agreed snapshot time for each asset class.
Apply the hierarchy
The primary source is selected per the fund’s pricing policy; fallbacks are applied and logged when the primary is missing or stale.
Compare and flag
Each price is compared with secondary sources and prior day. Moves or differences outside tolerance, stale prices and zero or missing prices are flagged.
Investigate
Analysts check for corporate actions, mapping errors, news and quote age, and gather broker quotes where needed.
Challenge and escalate
Unresolved exceptions go to the manager or the administrator through the price challenge process, with evidence attached.
Document
Final prices, overrides and their rationale are recorded in the valuation file for the pricing committee and auditors.
Illiquid assets, Level 3 marks and the price challenge process
- 01
Level 3 mark support
For private loans and other illiquid positions, we gather inputs, maintain the model or valuation-agent output, track movements between periods and prepare the evidence pack the valuation committee reviews.
- 02
Price challenges
When the administrator’s price differs from the fund’s, we prepare a challenge with supporting quotes and trade evidence, track it to resolution and record the outcome for audit.
- 03
Valuation policy support
We help draft and maintain the pricing policy: hierarchy by asset class, tolerances, override approvals and committee procedures. Policy approval remains with the manager’s governance.
- 04
Mark-to-market controls
Daily mark-to-market checks catch stale positions before they sit in the NAV for weeks, a common finding in operational due diligence.
Valuation deliverables by cycle
- Daily price exception report with tolerance breaches and stale prices
- Source comparison: desk vs PMS vs administrator vs vendor
- Override log with approver and rationale
- Monthly fair value level classification and transfers between levels
- Level 3 roll-forward and evidence pack for the valuation committee
- Price challenge log with outcomes
- Audit support file for year-end fair value testing
Valuations in the wider operating model
Pricing breaks rarely stay in pricing. They show up in position reconciliation, P&L explain and the administrator’s NAV review. Fundtec runs valuations alongside reconciliation and shadow accounting so a price difference is caught once and fixed once. For credit-heavy books, see private credit.
Engagement model
How an engagement is structured
Economics aligned to your growth. Scope, cadence and pricing are confirmed jointly in the first phase.
- 01 · Weeks 1–4
Onboarding & design
A phase-linked fee covers process mapping, the operational handbook, systems access and the SLA framework — before any handover.
- Target operating model
- Operational handbook
- SLAs agreed jointly
- 02 · From the parallel run
Monthly base fee
Your dedicated team, pod manager oversight and the governance cadence — daily huddle, weekly review, monthly service review, QBR.
- Named PM → SME
- Trained backup for every role
- Governance included
- 03 · As you grow
Scales with AUM
AUM-linked tiers and pre-agreed triggers for new mandates or counterparties — so growth never means renegotiating the contract.
- Transparent triggers
- No renegotiation
- Quarterly pricing review
Every engagement starts with a scoping call — no obligation, no generic proposal.
Request an indicative proposalQuestions
Common questions about Valuations & Pricing
Didn’t find your question? Put it to a specialist directly.
Ask a specialistFrequently asked questions
What is independent price verification for a fund?
Independent price verification is the check that the prices used to value a fund’s positions agree with independent sources within set tolerances. Fundtec compares prices from the desk, the portfolio management system, the administrator and market data vendors, investigates exceptions and documents the outcome, giving the manager and auditors evidence that each mark is supportable.
Does Fundtec decide the value of our Level 3 assets?
No. Valuation remains the manager’s responsibility, usually through a valuation committee, sometimes with a third-party valuation agent. Fundtec gathers inputs, maintains models or agent outputs, tracks period-on-period movements and prepares the evidence pack the committee needs to approve the mark and the auditor needs to test it.
What is a pricing hierarchy?
A pricing hierarchy is the written order of sources a fund uses to price each asset class, for example an exchange close first, then a named vendor, then broker quotes. It makes pricing consistent and auditable. Fundtec helps design the hierarchy, applies it daily and logs every time a fallback source is used.
Why do the administrator’s prices differ from ours?
Differences usually come from different vendors, different snapshot times, bid versus mid conventions, a corporate action applied in one system and not the other, or a stale price. Fundtec reconciles the sources daily, identifies the cause and, where the administrator’s price is wrong, prepares a price challenge with evidence and tracks it to resolution.
How does ASC 820 affect fund valuation work?
ASC 820 defines fair value for US GAAP and requires positions to be classified into Level 1, 2 or 3 by the observability of inputs, with more disclosure for Level 3. Fundtec maps each position to a level, tracks transfers between levels and prepares the roll-forward and supporting evidence for financial statement disclosures and audit.
Can you support funds reporting under IFRS?
Yes. IFRS 13 uses the same three-level fair value hierarchy as ASC 820, with some differences in disclosure and practical expedients. Fundtec applies the hierarchy the fund reports under and aligns the valuation file to the requirements of its auditors. Accounting policy decisions remain with the manager and its auditors.
What tolerances should a fund set for price exceptions?
Tolerances depend on asset class and volatility. Liquid equities typically use tight daily movement thresholds; high-yield bonds, loans and OTC derivatives need wider bands and a quote-age test. Fundtec proposes tolerances based on the fund’s instruments and history, and the manager approves them as part of its pricing policy.
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Share your asset mix and current pricing sources. We will show how an independent verification process would run for your funds.