BNY Mellon Alternative Investment Services has launched a service that independently validates a hedge fund’s position records to third-parties – prime brokers, custodians, trustees and agent banks, and independently verifies the pricing of that fund’s securities. The service is the first of its kind for BNY Mellon.
Speaking to GlobalCustodian.com, Marina Lewin, managing director of BNY Mellon, said: This is a service that could be an addition to current administration, for those hedge funds that have chosen not to fully outsource to give them an opportunity in a point in time for someone to independently verify their prices.
This new service comes at a sensitive time for hedge funds. According to a recent TABB Group research report, investors want more transparency and greater asset safety, which requires improvements in infrastructure for middle- and back-office operations, enhanced reporting to stakeholders and independent verification of portfolio values.
According to Lewin: demand for the service is coming from the hedge funds, either based on requests or anticipated requests from their investor base.
Currently, the price verification/asset validation service reconciles more than 27,000 client investment positions, with a total market value in excess of $24 billion. Client coverage rates (assets validated as a percentage of total portfolio scope and value) are in the range of 95-99%.
The service could even be used by investors to check up on the fund managers. However, Lewin explains that an investor can check it if is a separately managed account if it is co-mingled, our relationship is with the fund manager. We could offer this service to the fund manager for comingled assets if an investor drives that process, but our relationship would remain with the fund manager, and they would be doing it in consultation with the investor.
With a number of clients already on board, Lewin says others are lined up in the coming months: We did some one offs for clients in terms of how they wanted to structure their service model, but really going after the market with this product.
Pricing will be done on basis points based on the volume of holdings, complexity and number of counterparties. Clients can elect the service on a monthly or quarterly basis.