Today’s panel discussions here at GAIM Cayman never strayed far from two central themes: fees, valuations, and (il)liquidity.  In fact, this was a common topic of discussion among participants during the coffee and lunch breaks as well.

Market to market?  But which market?

For example, participants questioned the most appropriate way to value gated hedge funds. Many hedge funds have recently created side-pockets and special purpose vehicles to isolate illiquid holdings or to meet redemption requests (using the SPV as an “in-kind” distribution). Apparently, this has given accountants, administrators and COO’s a serious headache.

Should these SPVs be valued at their NAV or at some discount? How would a modified (discounted) fee schedule affect the appropriate value of a side pocket investment? More…