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What is AIRAS?

The Alternative Investment Return Authentication Service (AIRAS) provides insurance that returns reported by managers of hedge funds and private equity funds are accurate and at fair value. AIRAS' Alternative Investment Fair Value Report is designed for auditors and investment managers to ensure that returns are being reported properly and at fair value. AIRAS' Hedge Fund Return Confidence Rating Report acts as a due diligence check for Family Offices and Institutional Investors to ensure their investments and potential investments are not reporting fraudulently.

Since Hedge Fund and Private Equity investments (Alternative Investments - AIs) are not typically transparent, one cannot easily authenticate the value of constituent portfolio investments and hence validate that the self-reported NAVs are proper. AIRAS overcomes these constraints by combining mathematical optimization techniques within a Modern Portfolio framework to create what is termed the Replicating Portfolio Frontier. The frontier defines the area one would expect a target portfolio return to be within given the characteristics reported by the AI manager. Based on this analysis, AIRAS determines the degree of confidence that the Hedge Fund and Private Equity managers (AI managers) are reporting properly and that the reported return and associated NAV reflect fair value for financial reporting purposes.

The Importance of Transparency

A study conducted by Deutsche Bank, available from the Institutional Advisory Services Group, has shown that transparency is the fourth most important factor in assessing hedge fund managers. AIRAS ensures transparency by identifying the degree of confidence that the manager is reporting properly.

Hedge Fund Manager Assessment Factors

How AIRAS Improves Transparency

The confidence curve below is an actual example of an AIRAS analysis. Based on analysis undertaken by AIRAS, the level of confidence that the return is represented properly is only 21%. In this instance, the associated Net Asset Value was determined not to be at fair value, and the associated financial statement of the investor reflected this finding.

Confidence Curve

Who uses AIRAS?

Managements, Financial Professionals and Fiduciaries of Endowments, Pension Plans and Foundations:

  • Authenticate that Hedge Fund and Private Equity (AI) managers are reporting NAVs properly.
  • Meet auditor requests to demonstrate that fair value of Hedge Fund and Private Equity (AI) interests have been fully analyzed and evaluated by investor managements.


  • Evaluate analysis provided by investor managements that AI NAVs are proper and are reported at fair value.

Family Offices:

  • Support selection of AI managers by authenticating returns and measuring a manager's Alpha.
  • Assigns an easy to understand Rating to Hedge Funds to quantify confidence in Hedge Fund returns.

How does AIRAS help me?

If you hold AI investments or provide audit services to AI (Hedge Fund and Private Equity) investors, AIRAS:

  • Is the only system available that offers a fully objective statistical-based validation, that self-reported AI returns and NAVs are reported properly.
  • Significantly reduces staff burden in terms of time, effort and cost associated with the audit process.
  • Provides the analytical audit support consistent with AICPA requirements governing the audit of alternative investments.
  • Increases the level of transparency by testing whether the AI manager disclosures are aligned with self-reported returns and NAVs.
  • Minimizes the risk that auditors have traditionally accepted when auditing investments that are not transparent and highly illiquid.