SEC’s unwavering focus on disclosure of valuation methods and calculation of IRRs by fund sponsors

Purpose To explain the SEC’s historical focus on the calculation of investment performance and to highlight important issues for fund sponsors in the future. Design/methodology/approach This article discusses the SEC’s recent subpoena of at least one fund sponsor for information related to the firm’s practices in calculating internal rates of return and then explains the history of SEC enforcement in this area. Findings The SEC continues to be focused on how fund sponsors calculate investment performance metrics, such as IRRs, and the related disclosure. Originality/value This article contains valuable information for fund sponsors, such as best practices for valuation methods and related investment performance disclosures, including the calculation of IRRs from experienced investment fund lawyers.