If the past few months of turbulence has taught us anything, it’s that oversight accuracy becomes more important during times of market volatility. With the twin challenges of March’s significant market volatility combined with remote working still fresh in the memory, it’s a good time to take stock of how operating models performed. In this article, Brown Brothers Harriman focuses on the challenges fund managers faced while overseeing their net asset value (NAV) production, and draw out lessons learned for the future.
BBH provided a case study highlighting the importance of accuracy and efficiency in NAV oversight during this period. BBH analyzed NAVs of a large complex fund manager and compared them to two NAV validation processes; the first is the commonplace index comparison used by many fund managers, the second is InfoNAV, a BBH developed solution that recalculates a secondary NAV using many of the same inputs as the primary NAV. The difference in accuracy between these two validation methodologies yielded dramatically different results.
Bottom line: Now that the industry is operating in a more business as usual (BAU) environment, managers and fund boards are looking to implement the lessons learned from this unusual and unique period. One of the most important lessons has been that when dealing with a crisis, it is essential to make decisions on the best quality information available and to introduce the least number of unnecessary distractions. Oversight obligations on fund managers and fund boards are becoming increasingly stringent, adding to the need for accuracy and efficiency. The events of March 2020 demonstrated that ‘good enough on a good day’ was not good enough in a crisis when it was needed the most and more accurate solutions proved their worth.