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In the fourth fifth phase of processing fund of funds allocations, the system calculates the fund of funds allocations. Six allocation methods are available to calculate how to apply available for calculating the percentage used to allocate the cash flow on the top level-fund to each underlying securitized fund. The six methods include Actual, Rebalance Target, Rebalance Over/Under, Asset Class, User Defined and Security Level Target with Rebalance. A breakdown of each calculation follows.

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The Actual method allocates the cash flow amount to each underlying fund/security by taking the master fund's cash flow multiplied by the underlying fund's actual percentage. The system calculates the actual percentage for each underlying fund by taking the prior night net assets market value of the each underlying fund and dividing it by the master fund's adjusted prior night net assets. The Master master fund's prior night net assets is equal to the sum of all the underlying funds/securities' prior night net assetsmarket value.

Rebalance Target Method

The Rebalance Target method allocates the cash flow amount to each underlying fund/security by taking the master fund's cash flow amount and multiplying it by each underlying fund's target percentage. The system then adjusts the individual underlying fund allocation amounts by the projected over/under net asset amount for the underlying fund.

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The User Defined method allocates the cash flow amount to each underlying fund/security by taking the master fund's cash flow multiplied by the underlying fund's actual user defined percentage. The system determines identifies the actual percentage for each underlying fund by the cash flow amount, based on the percentage you entered. You can define the percentage to use for a positive cash flow and the percentage to use for a negative cash flow. If the cash flow is positive, then the system uses the target percentage defined for positive cash flows for allocation. If the cash flow is negative, then the system uses the target percentage defined for negative cash flows for allocation. The master fund's prior night net assets is equal to the sum of all the underlying funds/securities' prior night net assetsmarket value.

The user defined method is the only method that you can use to produce fund of fund allocations for unheld securities, because the only data needed to process a fund of fund allocation is the user defined target percentages. All other methodologies require underlying holding fund data such as market value to calculate fund of fund holdings.

Security Level Target with Rebalance Method

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After the first allocation of current day capital stock activity, the system performs a check for a cash buffer realignment amount or cash flow adjustment. If either exists, a second allocation for the net of these two amounts occurs. The second allocation takes into account the amounts from the first allocation and adjusts the net assets of the underlying funds/securities. Then, the whole process repeats. If the cash buffer realignment plus cash flow adjustment or cash flow #2 is positive, then the system ranks the underlying funds/securities below target by greatest need. If cash flow #2 is negative, the system ranks the underlying funds/securities above target. The system allocates the underlying fund/security with the greatest need the amount to true up to the second ranking underlying fund/security and so on, until cash flow #2 is fully allocated or all needs are equal and the remainder is evenly distributed. The system generates a second pending trade for the total allocation amounts amount but generates it with a current day trade date, and the trade remains pending until the current day price of the underlying fund/security is available. You can then update and release the pending trade.

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