New York, San Francisco, and London, May 20, 2008 – Paladyne Systems, Inc., a leading solutions provider for the hedge fund industry, Thomson Reuters, the world’s leading source of intelligent information for businesses and professionals, and NumeriX, the leading independent provider of advanced analytics for the derivative and structured products market, today released a research paper exploring trends in the pricing and valuation of complex portfolios and predicting an industry shift towards standardization of pricing and valuations methodologies.
In its paper titled, “Hedge Fund Portfolio Pricing Best Practices,” Paladyne Systems said that the industry lacks consistently applied pricing standards and methodologies that are needed to improve transparency of hedge fund pricing and valuation. The paper calls on the industry to come together in a constructive and helpful manner to define consistent pricing and valuation standards that the industry can embrace and regulators will, ultimately, enforce.
“For today’s hedge fund, there are no standard pricing methodologies that are consistent across the industry. As such, two different hedge funds could price the exact same portfolio differently—both considered correct and fair,” said Sameer Shalaby, CEO of Paladyne Systems. “The challenge for hedge funds and the industry at large is to establish standard pricing methodologies across all asset classes, first-generation pricing policies, and robust infrastructure and operational processes.”
“The President’s Working Group in April made significant and timely recommendations for hedge funds to bring their business practices up to par in all areas including valuations but ultimately placing that responsibility on the managers,” Gerard Buggy, Global Head of Hedge Funds, Thomson Reuters. “However, truly responsible pricing and valuation can only be achieved through the collaborative efforts, process and policies of not only the hedge fund managers but also fund administrators, prime brokers, analytics and data vendors, and technology solutions providers – all of whom have a role to play in an industry-wide solution.”
“The industry is at a juncture where regulation is anticipated,” said Steven O’Hanlon, President and COO of NumeriX. “The first step toward resolving inconsistent pricing and valuation is for the industry to take on the task of defining consistent pricing policies and methodologies that would have universal application and, in effect, become law. These standards should be led by the industry and come as a result to regulation.”
The paper, released today and available at www.paladyne.com, covers the following areas: The Pricing Challenge; The Need for Operational Transparency; Case Study: The $100 Million Hedge Fund; The Role of Fund Administrators; The Role of Prime Brokers/Counterparties; The Role of Data Vendors; The Role of Analytics Software Vendors; Technology as an Enabler; and The Move Toward an Industry Standard.
About Thomson Reuters
Thomson Reuters is the world’s leading source of intelligent information for businesses and professionals. We combine industry expertise with innovative technology to deliver critical information to leading decision makers in the financial, legal, tax and accounting, scientific, healthcare and media markets, powered by the world’s most trusted news organization. With headquarters in New York and major operations in London and Eagan, Minnesota, Thomson Reuters employs more than 50,000 people in 93 countries. Thomson Reuters shares are listed on the New York Stock Exchange (NYSE: TRI – News); Toronto Stock Exchange (TSX: TRI – News); London Stock Exchange (LSE: TRIL – News); and Nasdaq (Nasdaq: TRIN – News). For more information, go to www.thomsonreuters.com.
About NumeriX
NumeriX is the award-winning, independent leader in pricing and risk analytics for fixed income, credit, foreign exchange, hybrids, cross currency, commodities, inflation rate and equity derivatives. NumeriX has a financial engineering and quantitative team composed largely of PhDs on the same scale as the very largest of financial institutions. More than 275 clients across 25 countries rely on NumeriX for speed and accuracy in valuing their structured products and derivatives. Trading and risk platform vendors leverage NumeriX analytics to gain a time-to-market advantage by embedding the power of NumeriX into their systems. Founded in 1996, the company is privately held and has offices in New York, Chicago, Santa Fe, Toronto, London, Paris, Singapore and, Tokyo. For more information visit www.numerix.com.
