A custom blended benchmark consists of underlying source entities based on weights, rates of return, and entity assignments at node levels. The process for defining custom benchmark structures and generating the performance data, returns, and weights is generally the same across all types of custom benchmarks. The custom structures that you can define and the source data required to build the custom benchmark data can differ depending on the custom benchmark type.
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The build security level options (Perf_Summ_Type - “S”) now include Perf_summ_type S and Perf_Summ Types – SS and SP. The Custom Index Module can consume and commit process security type returns like SS and SP for the following options: Blended Weighted, Floating Weight, Floating Aggregate and Currency Conversion CIDX benchmark types.
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This can be overcome by committing Position by Strategy and Dictionary Classification (SP) records, which involves committing the same security returns under multiple nodes in the target dictionary. In addition, SP can be committed from a single position even if there are no overlapping securities.
In the case of For floating aggregates, if a security belongs to node A in source 1, and node B in source 2, then the CIDX build assigns the security based on the the alphabetical Entity entity ID in order of source 1 and source 2 (the security commit process would not fail). With this enhancement, the security will be committed at multiple nodes under ‘SP’ instance, if the option is chosen on UIuser interface.
Committing SS from S
If a fund has SS records (both L and S), then for performance attribution to be meaningful, the benchmark should also have SS records. CIDX will build Strategy by position from Single position.
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CIDX types with single source entity like Currency Conversion currency conversion have the option of which security type returns to be picked chosen for source and target. Here S source can create S. SS can create SS, and SP can create SP.
The values of the new security types used and built is are stored in the Custom Index Attributes table under the user data column. A possible issue with a custom blend is when one source benchmark contains security level data, and another source benchmark does not. In this case, the build creates a custom benchmark with the securities from only one source benchmark, which can be misleading.
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If you use the Long Short Indicator in the grouping rule and intend to build a SP/SS Perf_summary type from S/SS/SP, then the strategy_detail_id is assigned based on the node to which the source index is attached. The source index will be part of that strategy. Assume we have two strategies Core and Tactical : you can assign one index under the core strategy and another index under the tactical strategy and build the SS/ SP perf summary types. If the same security is part of multiple nodes in the target dictionary on the same day under but different strategies (strategy detail ID), then the SS build option will not fail.For example:
In blended benchmark, if Source 1 has Apple in equities and source 2 has Apple in bonds on the same day that the target dictionary will have Apple in both nodes and S, SS will fail. In this case the SP type commit will build showing apple under the Equity equity and Fixed Income fixed income buckets in the target.
In the very same example, if we have the LS Indicator in the grouping rule with 2 strategies like core and tactical, and source 1 is assigned to core, and source 2 is assigned to tactical, then the SS commit will not fail as they fall under different strategy detail ID on the same day. The SP type build will be successful.
Build SP/SS from S/SS/SP without LS Indicator in the
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Grouping Rule
If you do not use the Long Short Indicator in the grouping rule and intend to build a SP/SS Perf_summary type from S/SS/SP. Then based on the underlying source entity security level weights the system assumes the positive weights as long strategy and the negative weights as short strategy. The system assigns the strategy detail ID accordingly and does the CIDX build process with SP/SS. The SP will be able to commit even if the same security is part of multiple nodes on the same day.
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