Hedge funding accounting and administrative services help a manager handle the clerical, tax, and financial reporting aspects of running a fund. Hedge fund managers have their hands full running the trading aspect of a fund and need accounting and administrative services to manage the financial details. Besides, it's important that a hedge fund has a third party to monitor the fund activities for proper transparency. In order to understand hedge fund accounting and administrative services, it's imperative to know some key terms.
Net asset valuation calculations
One of the primary responsibilities of a hedge fund accounting and administrative service company is to calculate the net asset value of a given fund. The net asset valuation calculations take the total hedge fund value and divide it by the number of the available shares. The Securities and Exchange Commission sets the rules for computing net asset valuation.
Another responsibility of the hedge fund administrative and accounting service is the generation of contract notes. The contract notes are what an investor in the fund uses to check and verify the transactions a fund makes on a daily basis.
If you're thinking of investing in a hedge fund, independent verification is a key service that the hedge fund administrative and accounting service provides. This independent verification allows an investor to avoid hedge fund frauds and the hedge fund manager the ability to provide third party verification of fund returns.
Due diligence is the process by which a potential investor researches the industry and individual funds. Hedge fund administrative and accounting services plays a key role in facilitating due diligence. These service companies provide investors with an independent report to gauge fund quality.
Performance attribution reports
Performance attribution reports rely on the information provided by the hedge fund accounting and administrative service company. You can judge the relative industry performance of any hedge fund based on these reports. Some administrative and accounting companies produce their own reports as well.
The Chinese wall is the separation of different company divisions to ensure data integrity. A hedge fund administrative and accounting service provides this in that it's separate from the hedge fund and is supposed to have no vested interest in the profits of the hedge fund. Therefore, investors can rely on this data to make a sound investment.