Research carried out by Funds Europe suggests that almost half of asset managers are using spreadsheets to carry out oversight of their net asset value (NAV) calculations.

This is despite the growing focus on fund valuations from both regulators and investors as well as a demand for more robust oversight processes.

The research, carried out in partnership with investment software firm Linedata, found that 51% of respondents have systematic NAV oversight in place but 49% of firms are relying on spreadsheets to carry out such checks.

Worryingly, spreadsheets are rarely able to provide the accuracy, scale and sophistication needed for something this important, says industry experts.

“Best practice would be to avoid using spreadsheets for NAV oversight,” says Matt Grinnell, product manager at Linedata.

“Regardless of where the NAV is struck, firms should also ensure true segregation of duties between the teams and technologies used for NAV production versus oversight.”

However, cost is an inevitable and unavoidable factor in such operational decisions, says Grinnell.

One alternative is full shadow NAV in which the entire process is replicated. This was used by 15% of the respondents but is typically an expensive approach and requires a significant amount of data.

A more cost-effective strategy would be the use of contingent NAV which takes a more analytical approach using algorithms and acts as a reasonability check. While this is used by just 13% of respondents, there is an expectation that this figure will increase in the years to come, according to Grinnell, as regulatory scrutiny and awareness of NAV production risk increases.

The full survey, which featured 70 investment professionals, can be accessed here 

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