Editing Net asset value (section)

==Valuation of assets in open-ended funds and hedge funds==
The NAV of a [[collective investment scheme]] (such as a U.S. [[mutual fund]] or a [[hedge fund]]) is calculated by reference to the total value of the fund's [[portfolio (finance)|portfolio]] (its assets) less its accrued liabilities (money owed to lending banks, fees owed to investment managers and service providers, and other liabilities).<ref>CFA Institute. (2008). ''Derivatives and Alternative Investments.'' pg 177. Boston: Pearson Custom Publishing. {{ISBN|0-536-34228-8}}.</ref>
 
Calculation of the net asset value for a hedge fund, including the calculation of the fund's income and expense accruals and the pricing of securities at current market value, is a core [[fund administrator]] task, because it is the price at which investors buy and sell shares in the fund.<ref name=autogenerated2>[http://files.irishfunds.ie/1433105561-2009-9-guide-to-sound-practices-for-hedge-fund-administrators.pdf ''Guide to Sound Practices for Hedge Fund Administrators'']</ref> The accurate and timely calculation of NAV by the administrator is vital.<ref name=autogenerated2 /><ref>[https://www.iomfsa.im/media/2320/soundpracticeguidelines.pdf "Sound Practice Guidelines for Administrators of Alternative Funds including Experienced Investor Funds in the Isle of Man"]</ref>

In 2003, investors in Lancer Group sued hedge fund administrator [[Citco]] for allegedly knowingly disseminating "misleading" Net Asset Value (NAV) statements.<ref name="auto8">{{Cite book|url=https://books.google.com/books?id=y7OYBAAAQBAJ&q=citco+administrator&pg=PA106|title=Hedge Fund Governance: Evaluating Oversight, Independence, and Conflicts|first=Jason|last=Scharfman|date= 2014|publisher=Academic Press|isbn=978-0-12-802512-3|via=Google Books}}</ref><ref>{{Cite web|url=https://fortune.com/2011/05/09/pulling-the-veil-on-the-veil-pullers/|title=Pulling the veil on the veil pullers|work=Fortune|author= Katie Benner|date=May 9, 2011}}</ref>  Citco ultimately informed investors that it was resigning as administrator to Lancer's funds, but did not provide an explanation. While Citco pointed to the fact that it had sought statements from Lancer's board of directors as to the propriety of the valuations, Southern District of NY Judge [[Shira Scheindlin]] wrote: "Although these actions demonstrate Citco Group's questioning of the numbers, they could also be interpreted as Citco Group's efforts to shield its own involvement in the process".<ref name="auto8"/> Ultimately, Citco settled with investors.<ref name="auto8"/>

The case of ''Anwar v. Fairfield Greenwich'' (SDNY) is the major case relating to fund administrator liability for failure to handle its NAV-related obligations properly.<ref name=autogenerated4>[https://www.nixonpeabody.com/en/ideas/articles/2016/05/10/madoff-anwar-case-with-235-million-in-settlement-monies-finally-comes-to-a-close "Madoff Anwar case, with $235 million in settlement monies, finally comes to a close"]</ref><ref name=autogenerated1>[https://www.law360.com/articles/691802/the-citco-settlement-and-what-lies-ahead-for-pwc "The Citco Settlement And What Lies Ahead For PwC,"<!-- Bot generated title -->] Law360.</ref> The defendants settled in 2016 by paying the ''Anwar'' plaintiffs $235 million.<ref name=autogenerated4 /><ref name=autogenerated1 /> The court held in the case, prior to the settlement, that "it is reasonable to infer from Plaintiffs' allegations that the Administrators were aware that Plaintiffs would—and did—rely on their statements of the Funds' NAVs that were sent to the investors.... Accordingly, the Court finds that Plaintiffs allege a relationship between the investors and the Administrators that gives rise to a [[duty of care]] ...."<ref name=autogenerated3>[https://h2o.law.harvard.edu/cases/5052 ''Anwar v. Fairfield Greenwich'' (SDNY)<!-- Bot generated title -->]</ref>