MSCI is to use Interactive Data Corporation’s Fair Value Pricing to provide fair value adjusted index data for its global equity indices.
The aim is to make it easier for active mutual fund managers to explain the tracking error caused by fair valuing their international and global funds.
“Managers of active international mutual funds have struggled to explain funds' tracking error versus their benchmarks caused by fair value portfolio pricing,” says Diana Tidd, managing director and head of the MSCI index business in the Americas. “This agreement brings together two industry leaders to create a simple tool to help understand the impact of fair value pricing on funds.”
MSCI will provide fair value adjusted index data for the main indexes across the MSCI ACWI, MSCI Developed Markets and MSCI Emerging Markets Index families.
“The collaboration between MSCI and Interactive Data represents a milestone for the mutual fund industry, where systematic fair valuation for global equities has been a near universal practice among funds for several years now,” says Andrew Hausman, president, pricing and reference data for Interactive Data Corporation. “We expect that the MSCI Indexes with IDCo Fair Value Pricing will serve as an important reference tool for understanding valuation differences that may arise between the fund and its benchmark, and also provide investors with an additional reference point to form their opinions of value and support important trading decisions.”
The MSCI Indexes with IDCo Fair Value Pricing are calculated using fair value evaluated prices as of the close of the New York Stock Exchange provided by Interactive Data's Fair Value Information Service. These indices aim to reflect the daily pricing adjustments that US mutual funds may make when assessing the fair value of their international equity holdings as part of the fund's NAV calculation.
