Markit Launches Derivatives Valuations Service
London, 11th April 2006 - Markit Group Limited ("Markit"), the leading industry source of independent mark-to-market pricing and valuations for the global financial and commodities markets, today announced it has launched a Portfolio Valuations service for its buyside clients.
Markit Portfolio Valuations is aimed at mutual funds, hedge funds, traditional asset managers, fund administrators, custodians and banks. The service was launched to address growing concerns among investors and regulators over the lack of accurate, independent valuations for complex, illiquid instruments.
Markit Portfolio Valuations is a bespoke service that provides critical, independent post-trade calculation of the gross asset value of a portfolio of trades. The service covers a wide range of securities and OTC derivative instruments, both vanilla and exotic.
Markit draws upon its proprietary data, received from over 60 leading market makers, to drive its Portfolio Valuations service. The ability to refer to these prices, which span over one million data points collected daily, sets Markit apart from alternative services.
Markit's unique view of the second order inputs, such as option volatility, smile and skew as well as detailed correlations, is used to ensure the accuracy of valuations. Inputs are rigorously cleaned and validated, and valuations are audited by Markit's valuation specialists for unusual P&L moves. These independently verified valuations are provided on a daily, weekly or monthly basis which in turn allows clients to establish fund Net Asset Value (NAV).
In June last year, the Financial Services Authority (FSA) published a discussion paper on 'Hedge Funds: a Discussion of Risk and Regulatory Engagement' in which it warned about weakness in valuation methodologies and processes creating 'significant potential for ill-informed investment decisions'.
In August last year, the Managed Funds Association published its 2005 'Sound Practices for Hedge Fund Managers' in which it highlighted the importance of establishing valuation policies and procedures that incorporate the concept of fair value, and that are fair, consistent and verifiable.
Further concerns were voiced in January this year by the FSA in its 2006 'Financial Risk Outlook' report, in which it cautioned that uncertainty over valuations of bespoke OTC derivative instruments was a 'priority risk' in the financial services sector. Dan Waters, FSA Director of Retail Policy, signalled earlier this month that the regulator was reviewing valuation practices at hedge funds.
Markit believes its service will help to allay these regulatory concerns by bringing transparency to the valuations practices that exist in the fast growing OTC derivatives markets. The market for privately negotiated derivatives now totals $236 trillion in notional, according to the recently published International Swaps and Derivatives Association's Year-End 2005 Market Survey. Markit Portfolio Valuations meets investor requirements for reliable, accurate pricing, allowing institutions to better understand and manage their risks with valuations from an independent and trusted third party.
Markit began to provide its Portfolio Valuations service to twenty fund administration, asset management and hedge fund clients in 2005. Following significant investment in systems and staff, the service is now offered to clients worldwide.
Stephanie Whitford, Head of Derivative Operations at Schroders said: "We were looking for independent valuations of our funds and a quick time to market was essential. Markit's outsourced solution helped us to implement this by providing a robust, best-of-breed service in just two days. The alternative would have been a large scale system implementation which would have taken many months."
Tim Barker, Executive Vice President and Head of Valuations at Markit said: "Client demand for reliable, transparent marks on complex, illiquid assets coupled with the increased pressure from regulators for a move to best practice in price verification, spurred the launch of Markit's Portfolio Valuations service. We see this as a key opportunity over the next two years as we work with our clients to enhance their risk management capabilities by providing them with an accurate, independent valuations service."
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For further information, please contact:
Markit
Teresa Chick
Markit Group Limited
Tel: +44 (0)20 7260 2094
Email: teresa.chick@markit.com
About Markit
Markit Group Limited is the leading industry source of independent pricing and valuations for the global financial and commodities markets. Markit has data contributed by over 60 dealing firms, and its services are used by 400 institutions globally. Areas of product expertise include OTC derivatives (credit, equity, FX, rates, inflation, energy, power, metals and structured products), corporate bonds, syndicated loans, dividend forecasting, and index and ETF management.
Markit has most recently brought price transparency to the European asset-backed securities market with the launch of the first independent ABS pricing service. Its position in the derivatives markets has been acknowledged by the industry with awards from Risk Magazine for Trading Initiative of the Year 2006 (Credit Event Fixings); Structured Finance International's Editor's Award for Advancing Structured Finance 2006; International Securitisation Report's Editor's Award for Innovation 2005; International Financing Review's Innovation of the Year 2005 (Credit Event Fixings); Financial News' Best Derivatives Data Provider 2005; and Institutional Investor's Operations Management Award for Vendor of the Year 2005.About Schroders
Schroders is a global asset management company with 122.5 Pounds ($211.0 / 178.2 Euros) billion under management as at 31 December 2005. Its clients are major financial institutions including banks and insurance companies, local and public authorities, charities, pension funds, high net worth individuals and retail investors.
Schroders' aim is to apply its specialist asset management skills in serving the needs of its clients worldwide and in delivering value to its shareholders. With one of the largest networks of offices of any dedicated asset management company and over 250 portfolio managers and analysts covering the world's investment markets, Schroders offers its clients a comprehensive range of products and services.