Forbes – If returns are meant to justify the fee levels being charged by private equity and hedge funds, then it is incumbent on all parties to clearly understand and report these returns accurately.
To measure the performance of a fund, several important pieces of information are required. These include the money provided by investors; when the money was put into the fund (e.g., all at once or in stages) and how the cash was used (e.g. investment or management fees); the distribution of cash and investment held; and the valuation of each unrealised investments currently held. Equally important, this information must be correct, current and complete. In particular, valuation of unrealised, illiquid investments can be the most problematic for both private equity and hedge funds, and leads to potential differences in practice.