The market volatility caused by the coronavirus pandemic and steps taken in response to the pandemic have, among other things, made it challenging for hedge fund managers to value certain assets. For example, closure of the Chinese financial markets in early 2020 made it impossible for managers to obtain prices for stocks traded in those markets. Other kinds of crises, such as terrorist attacks or the hacking of a third-party pricing agent, could also make it difficult for fund managers to accurately value their assets. Ideally, a manager should have robust valuation policies and procedures that not only specify the methodology to be used to value the fund’s assets but also include a contingency plan for when that methodology cannot be used – but not all policies and procedures have backup plans. In that event, what should a manager do? This first article in a two-part series analyzes why proper valuation of a hedge fund’s assets is so important, especially in the eyes of the SEC; discusses circumstances that may make valuing a fund’s assets challenging; and emphasizes the need for establishing fair market value. The second article will spell out the steps that a manager without a specified contingency plan in its valuation policy should take if it must deviate from its usual valuation procedures due to a crisis. See “Paul Hastings Attorneys Discuss Fund Governance and Management, Valuation and Line of Credit Issues Arising Out of the Coronavirus Pandemic (Part One of Two)” (Jun. 4, 2020); and “How Fund Managers Can Withstand the Coronavirus Pandemic: Form ADV Filing Relief, Investor Communications and Fund Valuation Issues (Part One of Three)” (Apr. 2, 2020).