Fund-level, not investor-level, high-water marks
Tracking a single high-water mark for the whole fund instead of per investor overcharges anyone who invested after a drawdown and undercharges early investors — a subtle but material error.
Hedge Funds
Outsourced fund accounting for hedge funds that need NAV done right, every month.
High-water marks, incentive fee crystallization, and side pocket accounting handled with the discipline your administrator and auditors expect — on a fixed monthly fee.
The mechanics that make hedge fund accounting different
Monthly NAV isn't optional, and neither is getting the fee math right.
Hedge fund accounting runs on a much faster clock than private funds — investors expect monthly or quarterly NAV, and every NAV strike carries real consequences for subscriptions, redemptions, and fee calculations. That means reconciliation to your prime broker and fund administrator has to happen reliably, every period, not just when something looks off.
Incentive fee and allocation crystallization is where the real technical risk lives. High-water marks have to be tracked at the investor level, not just the fund level, so that an investor who bought in near a peak doesn't get charged an incentive fee on a recovery that merely returns them to where they started. Side pockets for illiquid or hard-to-value positions need separate accounting treatment so they don't distort the liquid NAV that redeeming investors are paid out on.
Getting any of this wrong isn't just a bookkeeping error — it can mean over- or under-charging investors real money, which is exactly the kind of issue that draws regulatory and investor scrutiny.
What I handle
- Monthly & quarterly NAV calculation and administrator reconciliation
- Investor-level high-water mark tracking
- Incentive fee & allocation crystallization calculations
- Side pocket accounting for illiquid or hard-to-value positions
- Subscription & redemption processing support
- Annual audit coordination & investor reporting packages
Where it goes wrong
Common hedge fund accounting mistakes
Side pockets that leak into liquid NAV
Illiquid positions that should sit in a side pocket instead get valued alongside liquid holdings, distorting the NAV that redeeming investors are paid against.
Reconciliation drift
Small breaks between the administrator's books and the manager's internal records compound month over month if they aren't caught and resolved immediately.
Reporting cadence
What monthly hedge fund reporting should actually include
Beyond the NAV figure itself, investors and auditors expect a consistent reporting package that tells the same story every period.
Performance attribution
A clear breakdown of what drove the period's return — by strategy, position, or asset class — so investors aren't left guessing why NAV moved the way it did.
Fee & expense transparency
Management fee accruals, incentive fee/allocation calculations, and fund expenses shown clearly enough that an investor could recompute their own net return.
Exposure & risk summary
Gross and net exposure, concentration by position or sector, and leverage metrics — the operational detail sophisticated allocators expect alongside the return number.
Administrator reconciliation confirmation
Explicit confirmation that the manager's internal NAV ties to the independent administrator's calculation — the single most reassuring line item in any investor letter.
Working with an outsourced fund accountant
Why hedge funds choose a fixed-fee partnership over hourly billing
Hourly billing creates a perverse incentive around reconciliation breaks and NAV disputes — the more time something takes to untangle, the more it costs you. A fixed monthly fee removes that tension entirely, and it means I'm equally motivated to get NAV right the first time every month, not to bill more hours investigating a break I could have caught with better process.
Strategies I support
Across long/short, multi-strategy, and quant approaches
The accounting fundamentals stay consistent, but the operational detail shifts by strategy — and I tailor the reconciliation and reporting process accordingly.
A quant fund trading thousands of positions daily needs a reconciliation process built for volume and automation. A concentrated long/short book needs deeper attention to individual position-level fair value and disclosure. Knowing which detail matters most for your specific strategy is what keeps monthly close efficient instead of generic.
Long/short equity
Multi-strategy & multi-manager pods
Quantitative & systematic strategies
Credit & distressed debt
Digital asset hedge strategies
Master-feeder hedge structures
Let's tighten up your NAV process.
Bring your fee structure, high-water mark methodology, and current administrator setup to a consultation — I'll show you where the gaps are.
Schedule a Consultation