IOSCO Seeks Comment On Proposed Hedge Fund Portfolio Valuation Principles

By Elizabeth Shea Fries and Jackson B.R. Galloway

The Technical Committee Standing Committee (the "Committee") on Investment Management of the International Organization of Securities Commissions ("IOSCO") published a report (the "Report") proposing a single, global set of principles for the valuation of financial instruments employed or held by hedge funds (the "Principles"). Each Principle is accompanied by specific guidance regarding its implementation through comprehensive hedge fund portfolio valuation policies and procedures. The Report focuses on challenges that arise when valuing illiquid or complex financial instruments and notes that significant leverage employed as part of hedge fund investment strategies increases the importance of establishing appropriate values for a hedge fund’s financial instruments. The Report also discusses the concerns driving the Principles’ development.