Shadow Accounting: Time to up your game?

Shadow Accounting is in the spotlight. Regulators and investors demand more transparency than ever. Asset classes are increasingly complex and exotic. Add market turbulence, and it’s critical that you know what your portfolio is worth, independent of your administrator’s end-of-day or end-of-month reporting.

Depending on your organization’s size, operational resources, and portfolio, consider your options:

• Shadow Accounting: Strike a shadow NAV with our Portfolio Accounting Software for traditional and alternative funds
• NAV & Fund Oversight: Replace spreadsheets and automate processes with our NAV Oversight platform
• Outsourced Shadow Accounting: Shadow NAV-as-a-Service from our Middle & Back Office experts
• Co-sourcing: A hybrid approach where we help you free up internal resources by performing day-to-day operations and tasks on your accounting platform as an extension of your team.

9 common questions about Shadow Accounting and NAV Oversight

What is Shadow Accounting?

Investment funds use Shadow Accounting to independently verify the results provided by their fund administrator. Firms use a parallel accounting system to check a range of financial records, including Net Asset Value (NAV), fees, profit and loss (P&L), and other financial calculations.

How do I know if I need Shadow Accounting?

Shadow Accounting adds an important layer of oversight, transparency, and risk reduction to fund management. When outsourcing fund administration activities, consider using Shadow Accounting to catch potential errors early and mitigate against operational, financial, and reputational risk.

What are the differences between Shadow Accounting and traditional Fund Accounting?

Traditional Fund Accounting relies on the fund’s entire set of records, while Shadow Accounting uses the fund’s NAV and related calculations as a basis for verification and oversight. Shadow Accounting is ‘lighter’ in terms of technology and operations than a full-fledged Fund Accounting program.

What are some key benefits of Shadow Accounting?

Shadow Accounting provides a range of benefits, including enhanced transparency, reduced risk, and the ability to independently monitor fund-related processes and data. As part of a robust oversight process, it provides assurance to investors and other stakeholders that the fund is valued accurately.

How can I implement Shadow Accounting in my company?

Shadow Accounting involves establishing a parallel system to independently verify fund-related data. As experienced providers of Fund Accounting, NAV Oversight, and middle and back-office solutions, we offer a range of options to help you address your Shadow Accounting and NAV Oversight needs.

Should we outsource our firm’s Shadow Accounting?

Firms often outsource Shadow Accounting to free up internal resources for core activities and leverage specialist expertise and economies of scale from services providers. If you don’t want to fully outsource your Shadow Accounting, we provide co-sourcing solutions where our experts perform activities and tasks on your platform in your environment as an extension of your team.

What is NAV Oversight and how does it differ from Shadow Accounting?

Shadow Accounting is used to verify an array of results provided by outsourced administrators, while NAV Oversight specifically focuses on monitoring and ensuring the accuracy of Net Asset Value calculations. It uses oversight tools, such as Linedata Navquest, to reduce risks NAV-related risks.

What is Fund Oversight?

Fund Oversight is broader than NAV Oversight. It refers to the supervision and management of a range of fund-related processes, including accounting, administration, and compliance. Fund Oversight helps ensure smooth and accurate fund operations, including financial records, performance, and compliance with internal policies and regulations.

What is Portfolio Accounting? How does it differ from Fund Accounting?

Portfolio accounting tracks the performance and composition of a fund’s investment portfolio based its financial transactions, including buys, sells, dividends, and interest. Fund Accounting is crucial for accurate financial management and compliance. It involves the detailed tracking, recording, and reporting of a fund’s financial activities, including income, expenses, and capital gains.