INTRODUCTION

The purpose of this two day fund accounting and pricing introductory workshop is to give delegates a thorough understanding of Fund NAV calculation and shareclass accounting. In addition, delegates will gain an appreciation of the key risks involved and also of the key controls that should be in place and how they can and prevent from costly error.

WORKSHOP AGENDA

Introduction to Fund Valuation
• Key components of the NAV
• Income and Expense accruals
• Taxation
• Dual and Single Pricing
• Forward pricing principles
• Valuation point and frequency
• FSA expectations on the control environment

Difficult to Price Securities
• Identifying difficult to price securities
• Techniques for valuing illiquid debt instruments
• Illiquid, suspended and unquoted securities
• Asset backed and mortgaged backed securities
• OTC Derivatives
• Key controls and oversight arrangements

Dilution Levies and Swinging Pricing
• How dilution occurs
• Dilution levies vs dilution adjustments
• Developing an effective dilution policy
• Dealing fairly with institutional and retail investors
• Dilution as a protection from market timing

Share Class Accounting
• Why different shareclasses
• Approaches to apportionment of capital and income
• Monitoring for shareclass price divergence
• Currency hedging at class level
• Controls over shareclass accounting

Effective Risk Control Environments
• Controls over valuation of individual securities
• Controls over Income and Expense Accruals
• Tax balances
• Daily Fund level checks
• Higher level periodic checks

Effective Yield
• Key features of effective yield accounting
• The choice between effective yield basis or coupon basis for distributions
• Illustrative calculations
• Practical challenges with effective yield

Performance Fees
• Different approaches to calculating performance fees
• The use of target benchmarks and hurdle rates
• Operational issues,
• Internal procedures and controls to support performance fees
• Producing clear and simple explanations for investors
• Expectations of Depositaries
• Alternatives to performance fees

Fair Valuation Techniques
• When Fair Value Pricing may be needed
• Why FVP is required and how it protects investors
• Approaches to applying Fair Valuation
• International best practice on fair valuation
• Controls and governance over FVP
• Developing your FVP Policy
• Avoiding the need to FVP

Derivatives Accounting
• Trade capture, processing and data maintenance
• Marking to Market vs. Marking to Model
• The impact of liquidity on pricing
• Using pricing models
• Key controls and regulator’s expectations re. derivatives pricing
• Accounting for derivatives as capital or income, depending on motive and circumstances.

Pricing Errors
• Examples of how pricing errors can arise
• Key controls for early identification of pricing issues
• Processes for resolution of pricing errors
• Compensation calculations
• Regulatory requirements – materiality, de-minimis and FSA reporting

Report and Accounts
• Contents of long and short form reports
• Guidance for recognising income from bonds
• Derivatives
• Risk disclosures
• Upcoming IFRS developments

The Role and Expectations of Depositaries
• Review of Managers system and control arrangements
• OTC Derivative Valuation
• Pricing errors
• Dilution Policies
• Fair Valuation of Assets

Governance of Fund Accounting Outsourcing
• Identifying the key SLAs from a risk management perspective
• Considering which SLAs should be included in the MI pack
• The use of Key Risk Indicators (KRIs)
• The use of KRIs and Key Performance Indicators(KPIs) in relationship management
• Use of penalties and service credits