Assistance on implementation, calibration and follow-up of Swing Pricing
Deloitte’s Swing Pricing team provides consulting services in order to avoid dilution arising from capital activities. We provide assistance in the strategic review, operational implementation and the reporting of Swing Pricing efficiency.
Swing pricing is an anti-dilution technique which protects long term investors from the direct and indirect costs of capital activities in the fund. The long term performance of the fund is maintained with this solution.
Furthermore when the liquidity conditions in the market are deteriorating, Swing Pricing helps to pass on the costs of liquidity to investors leaving or entering the fund. It can thus be considered as a liquidity risk management tool as well.
Technically, the NAV is adjusted upward/downward is case of net subscription/redemption.
Strategic review, implementation assistance, operational practices, governance structure, monitoring and reporting of the efficiency are key elements of the process for which Deloitte can provide assistance.
Benefit and selection of an anti-dilution method:
- Using an anti-dilution method should not be automatic but should result from a study on the need to implement a measure and the choice of the method to be used.
Implementation of the selected method with impact study:
- The choice and implementation of the Swing Pricing should be based on a backtesting study which help define the levels of historic dilution.
- Record keeping, access rights to data and paramters, in-house controling process, internal communication, trainings for the distribution/sales teams should also be integrated in the scope of the implementation
Implementation of the governance:
- One key component in the implementation of the Swing Pricing is the definition of the Swing Pricing Committee or its equivalent, the scope and parameters of the swing pricing policy.
Monitoring of the efficiency of the Swing Pricing policy:
- After the implementation, the efficiency of the Swing Pricing Policy should be controlled. Deloitte has developed an analytics tool to provide such reporting.