Introduction to Fund Accounting

Course Code:	IFA 1110
Dates:	On a date of your choice
Venue:	City of London
Course Fees:	Available on application
CPD Credits:	12 hours

Course Outline & Objectives

Fund Managers, Administrators and Depositaries all have responsibilities for ensuring that funds are fairly and accurately priced. The increasing range of investible assets and available share classes, concerns around asset liquidity and increased expectations of efficiency, risk management and governance combine to make the pricing and valuation process more complicated and challenging than ever.

This practical two day workshop will equip delegates with a thorough understanding of the key elements of the Fund NAV calculation and of share class accounting. In addition, delegates will gain an appreciation of the key risks involved, the controls that should be in place and how they can detect and prevent costly errors.
 
The programme will also focus on developing efficient processes and effective governance to meet the needs of Boards, Managers, Trustees, Auditors and other stakeholders.

Attending will enable you to:

• Examine the elements that make up the net asset valuation (NAV) of the fund and the challenges to achieving fair and accurate valuation
• Address the pricing and valuation challenges presented by complex and difficult to value assets, including derivatives and illiquid and non transparent securities
• Consider how dilution occurs and the steps managers can take to prevent it
• Explore the accounting treatment required for multiple share classes
• Identify key risks in the fund accounting process and the controls needed to provide assurance that funds are fairly and accurately priced
• Account for bond income on a effective yield basis
• Review the components of an effective and transparent performance fee structure
• Determine when and how to apply Fair Value Pricing
• Recognise how pricing errors arise and how they need to be resolved
• Examine the provisions for the taxation of funds and the taxes applicable to authorised funds
• Apply the IMA Statement of Recommended Practice (SORP) to fund reports
• Understand the role of the Depositary in fund accounting
• Know what an effective governance framework looks like

Who will benefit?

This course will be of value to anyone seeking a practical introduction or refresher to fund accounting. This will include individuals responsible for Fund Accounting, Valuation, Pricing, Taxation, Operations and Administration in Investment Managers, Depositaries, Trustees and Third Party Administrators.


Course Leader: Darren Burrows

The course will be led by Darren Burrows, a Director at Funds-Axis. Darren is a qualified Chartered Accountant and Funds Expert with a comprehensive working knowledge of fund and shareclass accounting and strong familiarity with a number of leading fund accounting platforms.

Darren has supported large scale fund amalgamations and mergers, transitions of fund accounting platforms and outsourcing initiatives. He has supported Managers and Administrators in benchmarking and enhancing their fund accounting systems, controls and processes as well as supporting significant pricing error re-work projects.

Recent work has focused on governance over fund accounting arrangements and process re-engineering. This has included SLA development and re-engineering and development of service credit regimes in respect of outsourced fund accounting arrangements.


Course Programme

Session	Aim	Content
Introduction to Fund Valuation	To introduce the elements that make up the net asset valuation (NAV) of the fund and the challenges to achieving fair and accurate valuation	Key components of the NAV Income and Expense accruals Taxation Dual and Single Pricing Forward pricing principles Valuation point and frequency FSA expectations on the control environment
Difficult to Price Securities	To address the pricing and valuation challenges presented by illiquid and non transparent securities	Identifying difficult to price securities Techniques for valuing illiquid debt instruments Illiquid, suspended and unquoted securities Asset backed and mortgaged backed securities OTC Derivatives Key controls and oversight arrangements
Dilution Levies and Swinging Pricing	To consider how dilution occurs and the steps managers can take to prevent it	How dilution occurs Dilution levies vs dilution adjustments Developing an effective dilution policy Dealing fairly with institutional and retail investors Dilution as a protection from market timing
Share Class Accounting	To explore the accounting treatment required for multiple share classes	Why different share classes Apportionment of capital and income Monitoring for share class price divergence Currency hedging at class level Controls over share class accounting
Developing Effective Control Environments	To identify the key risks in the fund accounting process and the appropriate control arrangements to provide assurance that funds are fairly and accurately priced; to benchmark best practice	Controls over valuation of individual securities Controls over Income and Expense Accruals Tax balances Daily Fund level checks Higher level periodic checks
Effective Yield	To know how to account for bond income on a effective yield basis	Key features of effective yield accounting The choice between effective yield basis or coupon basis for distributions Illustrative calculations Practical challenges with effective yield
Performance Fees	To review the components of an effective and tranparent performance fee structure	Calculating performance fees Using target benchmarks and hurdle rates Internal procedures and controls to support performance fees Clear and simple explanations for investors Expectations of Depositaries Alternatives to performance fees
Fair Valuation Techniques	To know when and how to apply Fair Value Pricing	When Fair Value Pricing (FVP) may be needed Why FVP is required and how it protects investors Approaches to applying Fair Valuation International best practice on fair valuation Controls and governance over  FVP Developing your FVP Policy Avoiding the need to FVP
Derivatives	To respond to the pricing challenges presented by derivatives	Trade capture, processing and data maintenance Marking to Market vs Marking to Model The impact of liquidity on pricing Using pricing models Key controls and Regulators' expectations of derivatives pricing Accounting for derivatives as capital or income, depending on motive and circumstances
Pricing Errors	To consider how pricing errors may arise and how they need to be resolved	Examples of how pricing errors can arise Key controls for early identification of errors Processes for resolution of pricing errors Compensation calculations Regulatory requirements – materiality, de-minimis and FSA reporting
Taxation	To examine the provisions for the taxation of funds and the taxes applicable to authorised funds	The Investment Management Exemption, Tax Bulletin 60 and BN 26, 2009 Taxes applicable to UK authorised funds SDRT, CGT, Income Tax, Withholding tax and VAT UK vs Ireland and Luxembourg Recent and upcoming taxation developments UCITS IV and the tax obstacles to be addressed
Reports and Accounts	To apply the IMA Statement of Recommended Practice (SORP) to fund reports	Contents of long and short form reports Guidance for recognising income from bonds Derivatives Risk disclosures Upcoming IFRS developments
Role and Expectations of Depositaries	To understand the role of the Depositary in fund accounting	Review of Managers system and control arrangements OTC Derivative Valuation Pricing errors Dilution Policies Fair Valuation of Assets
Governance of Fund Accounting	To consider the key features of effective governance frameworks and how to effect operational change	Identifying the key SLAs from a risk management perspective Which SLAs should be included in the MI pack Use of Key Risk Indicators (KRIs) Use of KRIs and Key Performance Indicators(KPIs) in relationship management Use of penalties and service credits

This programme or any element of it can be delivered in-house at a time and location to suit your business. For more details, please telephone 020 3179 5779 or email enquiries@ctp.uk.com.

Booking

If you are interested in booking this course, or if you have any questions, please call call us on 020 3170 5779.