Email Contact Phone Company Visit Website

Bedford, MA Office

32 Crosby Drive
Bedford
MA
US

London, UK Office

Fitzroy House, 13-17 Epworth Street
London
GB

Australia, Melbourne Office

1155 Malvern Road
Malvern
Melbourne
AU

France, Paris Office

9 rue de Téhéran
Paris
FR

Ireland, Dublin Office

6 Georges Dock, 4th floor IFSC
Dublin
IE

Luxembourg, Lux Office

5th floor 28 boulevard Royal
Luxembourg
LU

Switzerland, Geneva Office

25, rue Kléberg
Geneva
CH

New York, NY Office

100 William Street, 17th Floor
New York
NY
US

White Plains, NY Office

100 Hillside Avenue
White Plains
NY
US

Santa Monica, CA Office

2901 28th Street, Suite 300
Santa Monica
CA
US

Hayward, CA Office

3955 Point Eden Way
Hayward
CA
US

Singapore Office

1 Raffles Place #21-02 One Raffles Place
Singapore
SG

Hong Kong, Central Office

2001-2005, 20/F The Center 99 Queen's Road Central
Hong Kong
HK

Channel Islands, Jersey Office

8 Hill Street St Helier
Jersey
GB

Germany, Frankfurt Office

Sandweg 94
Frankfurt am Main
DE

Spain, Madrid Office

Francisco Silvela 42 1a planta
Madrid
ES

Switzerland, Zurich Office

Loewenstrasse 2
Zurich
CH

Australia, Sydney Office

Suite 405/368 Sussex Street
Sydney
AU

Japan, Tokyo Office

Kyobashi No. 8 Nagaoka Bldg. 1F 2-20-9 Hatchobori Chuo-ku
Tokyo
JP

Location Office

International House 1 St. Katharine's Way
London
GB

Italy, Rome Office

Via Cristoforo Colombo, 149
Rome
IT

Chicago, IL Office

600 West Fulton, 7th Floor
Chicago
IL
US

New York, NY Office

100 Church Street, 11th Floor
New York
NY
US

UAE, Dubai Office

805, City Tower 2 Sh. Zayed Road
Dubai
AE

Lombard, IL Office

955 Parkview Boulevard
Lombard
IL
US

Australia, Melbourne Office

Level 36/2 Freshwater Place Southbank Boulevard Southbank
Melbourne
AU

Telephone

02072653703

Contact

tony cossey a cossey
[email protected]
Back to all Intercontinental Exchange announcements

Interactive Data Study Finds Use of Fair Value Adjustments by Benchmark Indices Can Reduce Tracking Error for International Mutual Funds

Interactive Data Corporation (NYSE: IDC), a leading provider of financial market data, analytics and related services, today announced the results of recent quantitative research conducted by its Pricing and Reference Data business which compared international mutual funds with relevant benchmark indices.

Through statistical analysis, the research revealed that comparing the performance of international mutual funds that use fair value adjustments with their proxy benchmark indices can be misleading if the benchmark indices fail to employ fair value principles. The study found that if proxy benchmark indices used fair value principles, tracking error (a common metric in gauging fund performance) for international mutual funds may be significantly reduced.

These findings are contained in a study conducted by Robert Haddad, senior manager of Evaluated Services, Interactive Data Pricing and Reference Data. In his research, Haddad reviewed public net asset value (NAV) data from April 2004 to March 2008 for a sample of 166 U.S. mutual funds investing in international equities, each representing a distinct fund family. Haddad estimated the daily tracking error during this four-year period by comparing the returns of these international funds to the returns of a pair of proxy benchmark indices, with one using local closing prices and the other using evaluated prices from Interactive Data’s Fair Value Information Service.

Tracking error estimates the standard deviation of the differences between a mutual fund’s returns versus those of a comparable benchmark index. It is often used by fund managers and investors to gauge a level of risk between mutual funds with similar investment styles, relative to comparable benchmark indices. A higher tracking error is generally associated with a perception of higher relative risk in the fund.

Interactive Data’s findings suggest that if international funds only use benchmark indices that are valued based on local closing prices of international equity securities, an inherent bias toward higher tracking error will persist. This bias is amplified on days with higher market volatility. However, if fair valuation principles are also applied to international benchmark indices, the result is a reduction in tracking error and a more “apples-to-apples” comparison for measuring fund performance.

“Our research estimates that approximately 93% of international mutual funds employ a systematic approach to fair valuation of international equities,” said Robert Haddad. “The pervasiveness of this practice among international funds, along with the extensive analysis of fund performance measurements by investors, and the findings of our study, suggest that the mutual fund community can benefit from an introduction of fair value adjusted benchmark indices.”

Currently, more than 160 fund complexes subscribe to Interactive Data’s Fair Value Information Service, which provides information that can be used to estimate the value of international equity securities after the close of trading in local markets. In 2007, Interactive Data was awarded a patent by the U.S. Patent and Trademark Office for Fair-Value Pricing of a Financial Asset.