Methods for Valuing and Reporting Alternative Investments

DerivActiv assists all types of entities with ASC 820 compliance, including validating the reported returns and values of alternative investments. The most widely used methods for verifying alternative investment (AI) returns and net asset value to meet the fair value reporting requirements under ASC 820 are using comparables and discounted cash flows. DerivActiv uses another method to verify or measure fair value of AI where we mimic the portfolio characteristics in order to create more refined comparables. The fairly recent growth of Exchange-Traded Funds (ETFs) allows us to have access to observable values and prices that can be used to mimic even the most opaque hedge fund strategies. Our portfolio simulation strategy utilizes publicly traded Level 1 assets to emulate the returns reported by the AI manager and produces verifiable fair values for reporting purposes. Our method is supported by arbitrage pricing theory, and has been vetted by several accounting firms.

DerivActiv can produce ASC 820 compliant fair values of alternative investments. Call 866-200-9012 for more information.

The marked increase in the number and value of illiquid securities held by pension funds, endowments, foundations, and corporations has created heightened attention from constituents, shareholders, and regulators. This increased scrutiny resulted in the implementation of ASC 820 by FASB which requires reporting entities to comply with rigorous standards of measuring fair value, explaining the methodology used to measure fair value, and supplying appropriate disclosures on financial statements. DerivActiv uses its portfolio simulation method to provide verification of returns and net asset values for alternative investments as required under ASC 820.

Call a DerivActiv expert to find out how we can help support the value of your Level 3 alternative investments: 866-200-9012. Or email us for more information.