From Shadow NAV to True Alignment

How reconciliation builds trust between funds and fund administrators

Shadow NAV: A Safety Net, Not a Solution

As you may already know, maintaining a shadow NAV has become standard practice for leading hedge funds to independently validate the figures reported by fund administrators.

It is a valuable safeguard, but it stops short of being a complete solution. Shadow NAVs highlight discrepancies, but they don't resolve them.

If you don't have a real view into data and exceptions, reconciliation becomes a one-sided audit. Breaks linger until month-end, creating delays and tension, while trust between fund and administrator quietly erodes.

In today’s environment, where operational risk is under heightened scrutiny from both allocators and regulators, that approach is no longer sustainable.

Why NAVs Fall Out of Sync

NAV misalignment is rarely the result of a single error. More often, it stems from structural challenges. Data becomes fragmented across multiple primes, custodians, and pricing vendors. Defragmenting that data happens in spreadsheets, and those spreadsheets are error-prone and slow to investigate.

Ultimately, the key issue facing shadow NAVs is simple: a fund and its administrator apply different methodologies to pricing, corporate actions, and accruals. Then, when exceptions arise, they're typically managed in email inboxes rather than auditable workflows.

The outcome is NAVs that you can't entirely trust (and which the admin will surely question).

Reconciliation as a Transparency Layer

Reconciliation, when designed well, is more than a comparison exercise. It is a collaborative process that surfaces discrepancies and enables their resolution in real time. Done correctly, it establishes a transparency layer between fund and administrator, further transforming reconciliation from oversight into alignment.

That's how we built Boagent: to function as a transparency layer between fund and administrator. Using our merge workflows, operators can consolidate trade, position, and cash data across internal books, administrator files, and broker reports. AI assists in defining transparent rules logic and fuzzy matching to surface breaks as they occur. From there, exceptions are assigned, tracked, and resolved with full audit trails, introducing structure and accountability to a process that is too often fragmented.

Whatever approach you take, building in transparency and traceability is paramount to longterm NAV success. If you follow that principle, you'll easily achieve faster NAV finalization, fewer bottlenecks, and greater confidence for both parties.

Transparency as an Industry Standard

The shift toward transparency is already underway. Northern Trust (whose former CTO, Scott Murray, is one of our advisory board members!) has introduced reconciliation dashboards that allow hedge fund clients to monitor exceptions in real time. SS&C has highlighted reconciliation efficiency as a central part of its evolving fund administration services. Institutional allocators are also probing managers more directly on how they ensure NAV integrity and exception resolution.

Look, if there's any word that describes modern financial services, it's "complexity." Instruments are becoming more complex, reporting standards are becoming more complex, data schemas are becoming more complex. And as this complexity touches your portfolios, static shadow NAVs doesn't cut it. Continuous reconciliation, coupled with proactive exception management, is becoming the industry baseline.

Ditch Spreadsheets, Go (BO)Agentic

Boagent provides the infrastructure to support this transition, serving as the connective layer between fund and administrator systems:

• Three-way matching: Align fund, administrator, and broker data in a unified workspace

• Reconciliation Copilot: Reconcile more often, scale your recons horizontally, and get immediate insights with AI native recon automation

• Exception tracking: Assign breaks, investigate root causes, and monitor resolution progress. All with an AI expert by your side.

• Audit-ready transparency: Deliver clarity for LPs, auditors, and internal risk committees

We make reconciliation so effortless that you can embed it into your daily operations. That's how we help firms to move from reactive oversight to proactive alignment.

From Oversight to Partnership

Good partnerships are built on mutual understanding. If you want your shadow NAV to foster a "partner" relationship between your fund and administrator, it has to be collaborative. Delivering on this will stop NAVs from becoming a point of contention, instead serving as a shared source of truth for both parties.

This shift builds a foundation of trust between fund and administrator, and ultimately, between managers and their investors.