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About: News Archive
IAFE Investor Risk Committee Releases White Paper on Valuation Concepts |
| 21-Nov-2003 |
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For immediate release
November 21, 2003
The IAFE Investor Risk Committee Releases
White Paper on Valuation Concepts For Public Comments
Click here to view document.
The Investor Risk Committee (IRC) of the International Association of Financial Engineers (IAFE) today released a new white paper, “Valuation Concepts for Investment Companies and Financial Institutions and their Stakeholders” for a period of public comments
Valuation is a keystone of the asset-and-liability management business. Properly valuing portfolios requires well-designed systems, procedures, policies and people. Stakeholders should satisfy themselves that the pricing procedures that investment-company and financial-institution managers use conform to the highest standards of correctness, fairness, transparency, and internal consistency. To assist all stakeholders, the IAFE Investor Risk Committee has produced a list of concepts to promote a thoughtful discussion around the many issues related to valuation.
The IAFE Investor Risk Committee began its work on “Valuation Concepts” in September 2002. The IRC is composed of individuals from: fund mangers, institutional investors, prime brokers, insurance, consultants, custodians, software and technology vendors, and others groups. The IRC’s collective experience in pricing across multiple individual portfolios, asset classes, and geographic locations is both broad and substantial.
The document seeks to address valuation concepts in considerable detail. The document is designed to help stakeholders develop their own set of criteria, as part of ongoing discussions about valuation procedures with managers. The approach is pedagogical, namely addressing topics in the form of questions, to assist less experienced investors and managers looking for information about important valuation concepts. The document makes no conclusions as to which methods are better than others. In fact, the IAFE stresses that that the wide variety of investment strategies, and the inherent variability in pricing any financial instrument, make it difficult – if not dangerous – to arrive at one-size-fits-all rules.
For this very reason, it is critical to understand the policies and procedures which underlie valuations. “Valuation Concepts” strongly discourages investors from turning the document into a written questionnaire. Frank discussion about valuations is far better than a written response to each question in the document.
The IRC hopes that “Valuation Concepts” will prove useful also to managers interested in performing self-assessments of their own valuation procedures, external auditors of management firms, directors and trustees of mutual funds, hedge funds, the U.S. Securities and Exchange Commission, and the U.S. Internal Revenue Service, among others.
The IAFE is releasing this document as a working draft with the hope of promoting further debate and soliciting additional comments. Readers can direct their comments to the IAFE at valuations@iafe.org until February 27, 2004, after which we intend to produce a final version.
“Valuation Concepts for Investment Companies and Financial Institutions and their Stakeholders” can be viewed on the IAFE’s web site, www.iafe.org. For more information on the Investor Risk Committee and its programs, please click here.
About the IAFE
The IAFE is a professional society dedicated to fostering the profession of quantitative finance by providing platforms for the discussion of cutting-edge and pivotal issues in the field. Founded in 1992, the IAFE is composed of individual academics and practitioners from banks, broker dealers, hedge funds, pension funds, asset-and-liability management firms, technology firms, regulatory bodies, accounting, consulting and law firms, and universities across the globe. For more information on the Investor Risk Committee or the IAFE, please contact Annie Bystryn at (212) 317-7479 or valuation@iafe.org.
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