Markit has extended its Fair Value to equities, allowing mutual funds to estimate the price of their foreign stocks after trading hours. The service was previously released for bonds in December last year.
The Markit Fair Value service for equities covers more than 40,000 international stocks and equity-related securities, such as options and futures. The service uses the correlation between a stocks price and more than 30 market, sector, regional and entity-specific factors to calculate the best estimate of a stocks price outside active trading hours.
In the United States, mutual funds typically calculate the net asset value of their portfolios at 4 p.m. The Investment Company Act stipulates that if there are no market quotations available to determine the market value of a stock, such as when a foreign market is closed, mutual funds must value the stock at fair value in order to calculate NAV, Markit explains.
Markit Fair Value prices are available to clients through multiple snaps per day that correspond to the closing times of major global markets and the needs of institutional clients.
We now offer the global mutual fund industry robust fair value services for equities and bonds, says Armins Rusis, managing director and co-head of Information at Markit. Funds can turn to Markit for an efficient, cross-asset class solution for the complex challenge of calculating NAVs for portfolios containing foreign securities. Our Fair Value services are designed to help clients both streamline operations and achieve a high standard for transparency, fund governance and compliance.
Matthew Berry, director of Valuations at Markit, adds: Our new service utilizes cutting-edge statistical techniques to pinpoint the correlations between equity prices in one country and a broad range of market factors in another. As mutual funds diversify their holdings by region, it increases the need for sophisticated fair value techniques and we routinely see instances where asset values change significantly between the time a foreign market closes and when mutual funds close their books.
(CG)