Pricing special report

May 2015 -- Sponsored by AIM Software and Thomson Reuters

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Ready For Transparency?

The questions this report raises about transparency in pricing include whether transparency improvements are driven more by regulation and standard definitions or by the demands of those consuming the pricing information.

Respondents in the Virtual Roundtable tend to call AIFMD (the Alternative Investment Fund Managers Directive in the European Union) and IFRS 13 (International Financial Reporting Standards) the major drivers for more transparency.

Earlier this year, IFRS accounting and valuation guidelines drove managers to pull together their reporting to meet January deadlines, as AIM Software's Michael Walford-Grant observes. "Now that this is out of the way, we're seeing a focus on ... an automated process for pricing funds consistently across the firm to meet the requirements of AIFMD," he says.

AIFMD has also led to the advents of third-party external valuation services, notes HSBC's Chris Johnson, which in turn led many service providers to review their processes. Practically, for AIFMD compliance and increased transparency, fund managers now have to compile reports specifying risk calculations and exposure levels, says Thomson Reuters' Jayme Fagas.

In addition, end-user firms need clarity about IFRS 13, a definition of fair value pricing, Walford-Grant relates. This has pushed suppliers of valuations and prices to be clearer about their sourcing.

The demands for transparency coming from regulators and policy-makers, as Fagas identifies, have driven industry participants to focus on increasing it. Since that policy driver is there, and so strong, we don't know if there would be the same focus on transparency without it, but the trend has arrived, ready or not.

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