will use FT Interactive Data's Fair Value Evaluation Service
for its funds. The service lends a hand to funds pricing non-US securities for the calculation of their NAVs.
FT Interactive, a division of Interactive Data Corporation, claims that forty fund firms are now using the tool to minimize the impact of price swings on their funds. Some investors make arbitrage plays between the US market and foreign stock funds when the US stock market makes a significant move after the foreign markets have closed.
The tool allows funds to estimate a fair value for foreign securities in the wake of significant events to offer the most accurate NAV to shareholders. Delaware Investments to worked closely with FT Interactive to test the service input using a specific mutual fund portfolio, according to the firm. The test allowed Delaware Investments' portfolio managers to compare the fair value evaluated price obtained by use of FT Interactive Data's Fair Value Evaluation Service against the next day's opening price of each security in their portfolio.
David K. Downes
, chief operating officer at Delaware said that the tests showed the service will help avoid the negative effects of market timing on Delaware's funds.
The Fair Value Evaluation Service calculates a price adjustment factor that is applied to the local market closing price of a non-North American equity along with a confidence interval. The confidence interval is designed to assist mutual fund managers in deciding whether a given security needs to be fair valued. This is done on a security-by-security basis, rather than by country, sector, or entire portfolio.
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