Fair-Value Pricing Hits Arbitrageurs

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Byline: Melanie Wold

Arbitrageurs who take advantage of market movements will find it more difficult if investment funds use fair-value pricing when calculating their net asset value (NAV).Investment funds calculate NAV daily using local prices, often before other geographical markets are open or after they are closed. If another market moves substantially, it can create distortions in NAV that arbitrageurs - mainly hedge funds - take advantage of by dipping in and out of the funds. This creates dilution of the fund and can cause losses to investors.

Thomas Aubrey, markets group director at FT Interactive Data (FTID), says arbitrageurs can look at market statistics …