Alternative investments are assets that are not listed on any national exchanges or over-the-counter markets, or for which quoted market prices are not available from sources such as financial publications, the exchanges, or the National Association of Securities Dealers Automated Quotations System [NASDAQ]). These investments generally do not fall under any federal or state regulator and have greater flexibility in investment strategies than registered investment companies.
The following are examples of types of alternative investments or investment strategies used by benefit plans:
- Bank collective investment funds
- Pooled separate accounts
- Stable value investments
- Private equity funds
- Hedge funds
- Real estate investment trusts
- Funds of funds
Tools and Resources
EBPAQC Primer, Alternative Investments in Employee Benefit Plans
The Center has developed this primer to provide Center members with a general understanding of alternative investments held by employee benefit plans.
AICPA Alternative Investments - Audit Considerations, A Practice Aid for Auditors
This practice aid includes an example confirmation for alternative investments, illustrative examples of due diligence, ongoing monitoring, and financial reporting controls as well as practical advice in auditing these investments.
PCAOB Staff Audit Practice Alert No. 2, Matters Related to Auditing Fair Value Measurements of Financial Instruments and the Use of Specialists
Issued December 10, 2007, this alert highlights certain requirements in the auditing standards related to fair value measurements and disclosures in the financial statements and certain aspects of GAAP that are particularly relevant to the current economic environment.
EBPAQC Plan Advisory: Valuing and Reporting Plan Investments
The Center has prepared this Plan Advisory for you to share with your plan sponsor clients to help them in understanding their responsibilities for valuing and reporting their plan investments.
EBPAQC Stable Value Investment Resource Center
Find general information about stable value investments, and links to authoritative literature, a primer, and past center calls related to those investments.
EBPAQC Live Forums
EBPAQC Roundtable Live Forum - Alternative Investment Audit Issues with Employee Benefit Plans
January 8, 2008
EBPAQC Live Forum - Alternative Investments - EBP Auditing Considerations
February 28, 2007
AICPA Employee Benefit Plan Conference PowerPoint Presentations
Auditing Alternative Investments, PowerPoint presentation from AICPA National Conference on Employee Benefit Plans, May 21 – 23, 2007, speakers: John Hubbe, Partner, KPMG and Peggy Bradley, Vice President, Northern Trust
- What are "Alternative Investments," and what's all the fuss about?
- How does the recent audit interpretations & practice aid impact your role in auditing plan assets?
- How does the trustee/custodian typically handle pricing of alternative investments, and what are the implications for certifications and limited scope audits?
- What practical steps can you incorporate into your audit planning process as it relates to alternative investments?
Alternative Investments, PowerPoint presentation from AICPA Employee Benefit Plans Auditing, Accounting and Regulatory Update Conference, December 7 – 8, 2006, speakers: John Hubbe, Partner, KPMG and Peggy Bradley, Vice President, Northern Trust
- Limited Scope Audits and Trustee Certifications: A refresher
- Alternatives – What are they?
- Audit Guidance: Why are limited scope audits receiving attention? What current guidance applies to the auditing of alternative investments?
- Recommendations: What audit procedures can you employ to ensure that the audit of these investments is meaningful?
Hard to Value Investments: A Look at Auditing Requirements and How Custodian Banks Typically Report HTVAs, PowerPoint presentation from AICPA National Conference on Employee Benefit Plans, May 8 – 10, 2006, speakers: John Hubbe, Partner, KPMG and Peggy Bradley, Vice President, Northern Trust
- Why all the fuss about HTVAs: Audit requirements related to HTVAs
- Common terms and definitions
- How does the custodian pricing process typically work for readily marketable securities?
- How does the custodian typically handle pricing of hard-to-value assets, and what are the implications for trustee certifications and limited scope audits?
- Auditing interpretations issued in 2005
- What practical steps can you incorporate into your audit planning process as it relates to hard-to-value assets?