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Fund Accounting

Definition

Fund accounting is a specialized accounting system used by investment funds to track the financial activities and calculate the NAV of investment portfolios.

Explanation

Unlike corporate accounting focused on profitability, fund accounting emphasizes accountability and accurate valuation. It involves daily pricing of securities, accrual of income and expenses, calculation of management and performance fees, and reconciliation with custodians. Fund accountants ensure regulatory compliance and accurate investor reporting.

Example

A fund accountant prices a $2B equity fund daily: marking 500 holdings to market, accruing dividends, calculating the management fee (1/365th of 1.5% annually), processing subscriptions/redemptions, and publishing NAV by 6 PM — every single trading day.

Related Topics

Fund Management

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