On November 19, the International Organization of Securities Commissions published its final report on the principles for the valuation of complex financial instruments in hedge fund portfolios.
The hedge fund valuation report sets out several principles designed to ensure that hedge fund valuations were not distorted to the disadvantage of investors, including:
- Establishing comprehensive, documented policies and procedures for the valuation of financial instruments.
- Identifying the methodologies used for valuing each type of financial instrument.
- Valuing the financial instruments held consistently and reviewing policies and procedures periodically.
- Ensuring that a high level of independence is maintained in the application of the policies and procedures and that an appropriate level of independent review is undertaken of each valuation and, in particular, of any valuation that is influenced by the hedge fund manager.