BNY Mellon Alternative Investment Services has launched an independent asset validation service for hedge funds aimed at improving transparency and giving reassurance to both fund managers and their investors.

The new service independently validates hedge funds’ position records to third parties such as prime brokers, custodians, trustees and agent banks, and values the pricing of funds’ securities. Building on BNY Mellon’s relationships with some 150 prime brokers and counterparties, the service is able to offer pricing and validation coverage across 50 asset classes, the bank said in a statement.

Hedge fund investors are understandably nervous following the numerous scandals of recent times, most notably the $65 billion Ponzi scheme fraud perpetrated by Wall Street financier Bernard Madoff. The reassurance and transparency offered by an independent price verification/asset validation service should therefore be a considerable pull to investors.

“Hedge fund clients are telling us their investors are demanding an independent validation of their holdings. The price verification/asset validation service helps address this need, which in turn helps hedge funds retain and grow their investor base,” said Brian Ruane, chief executive officer of BNY Mellon Alternative Investment Services.

The service, which can be used to supplement the work of accountants and independent auditors, can also be customised for clients’ specific requirements, such as tolerance checking across positions, price or market values.

The price verification/asset validation service reconciles more than 27,000 client investment positions, with a total market value in excess of $24 billion. Coverage rates, in terms of the assets validated as a percentage of total portfolio scope and value are in the range of 95-99 per cent, according to the firm.