• A growing concern among the hedge funds and money managers is the stringent accounting framework that has been imposed upon their derivative portfolio after the current financial crisis.
• This  necessitate the need to regularly manage their derivative portfolios to achieve fair market valuations. In the past companies have used counterparty price to value the positions but it is not transparent and not independent.
• Setting up an internal valuation team is a costly affair as it would involve heavy entry costs ( software, market data, specialized resources, IT setup and implementation ) and would add another complex process that would consume internal resources.

Using a specialized third party provider of independent valuations is a cost efficient and scalable model for a company. It provides flexibility and total independence from the front office. Also the additional services such as risk measurement, stress testing etc could be availed at marginal incremental cost.

Today, more and more hedge funds and money managers are using 3rd party valuation providers to provide valuations in tune with industry standards.