Markit, a leading, global financial information services company, have announced that that it has extended its Fair Value service to equities, enabling mutual funds to benefit from advanced fair value methodologies to estimate the price of their foreign stocks after trading hours or at other times when a security’s primary market is closed. Markit introduced its Fair Value service for bonds in December 2011.
The new Markit Fair Value service for equities covers over 40,000 international stocks and equity-related securities, such as options and futures. Markit’s methodology uses the correlation between a stock’s price and over 30 market, sector, regional, and entity-specific factors to calculate the best estimate of a stock’s price outside active trading hours. To serve mutual funds worldwide, Markit Fair Value prices are available to clients through multiple snaps per day that correspond to the closing times of major global markets and the needs of institutional clients.
Armins Rusis, Managing Director and Co-Head of Information at Markit, said: “We now offer the global mutual fund industry robust fair value services for equities and bonds. Funds can turn to Markit for an efficient, cross-asset class solution for the complex challenge of calculating NAVs for portfolios containing foreign securities. Our Fair Value services are designed to help clients both streamline operations and achieve a high standard for transparency, fund governance and compliance.”
Matthew Berry, Director of Valuations at Markit, said: “Our new service utilises cutting-edge statistical techniques to pinpoint the correlations between equity prices in one country and a broad range of market factors in another. As mutual funds diversify their holdings by region, it increases the need for sophisticated fair value techniques and we routinely see instances where asset values change significantly between the time a foreign market closes and when mutual funds close their books.”
US mutual funds generally calculate the net asset value of their portfolios at 4 pm ET. According to the Investment Company Act, if there are no market quotations available with which to determine the market value of a stock, such as when a foreign market is closed, mutual funds must value the stock at “fair value” in order to calculate NAV.
Markit’s Fair Value services provide independent, fully outsourced, and scalable solutions that use the most advanced methodologies to estimate price. Back testing confirms that the services provide a better estimate of the following day’s opening price than does the closing price of a stock or bond in its local market. The factor techniques used by Markit Fair Value build upon the credit and equity factor analytics capabilities that Markit offers through its Data Analytics & Research services.
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