The allocation of master fund activities, such as expenses and cash, can be based on a fixed percentage or a percentage of total net assets. The system automatically calculates the allocations and posts them based on an allocation rule that is defined at the fund level. The system can calculate a performance NAV at the manager level, if desired. The performance NAV parameters are set at the fund level, and are based on a combination of capitalized distributions, expenses, and capitalized estimated reinvestments. Once the performance shares are calculated they can be used in the performance NAV calculation at the manager level.
Multi-Class Funds
There are no system limitations to the number of share classes allowed and new share classes can be added to funds as required. Class allocation rules are set up outside of the fund set up process. Once an allocation rule has been set up, it may be assigned to a fund and one to many relationships are possible.
Class allocation ratios can be based on the following methods:
- Relative net assets
- Fair value settled shares outstanding
- Shares outstanding
- Prior night net assets
- Settled shares
- Settled shares without adjustment
- Fixed percentage
- Relative net assets at market value
An allocation rule can use one or more allocation methods. For example, expense ledger balances can be allocated based on the relative net asset method while unrealized gain loss ledger balances can be allocated based on the shares outstanding method. The range of general ledger accounts that are included and excluded from the allocation is very flexible.
Once an allocation rule is defined, it can be assigned to the fund. The fund allocates to its classes based on this rule. Fund allocations can be triggered at any time throughout the day. This is typically an event that is scheduled using Eagle's Scheduler module. The Scheduler can run events statically, based on a date and time, or dynamically, based on another event occurring. The class allocation schedule is typically run at transaction close; that is, when the accounting period is locked down and no transactions are allowed to post outside of valuations. It is also typically run at valuation close; that is, when the accounting period is locked down and no transactions, price updates, or valuations are allowed to run.
All general ledger balances that exist at the master/total fund level are allocated to the subclasses upon the allocation trigger. Class level transactions, such as expenses, subscriptions/redemptions, and distributions are automatically rolled up to the total fund at the time of the transaction. Detailed reporting is available at the master fund and class levels.
Eagle's Accounting solution records all postings accurately to a security ledger, such as holdings and tax lot inventory, as well as an integrated general ledger in debit/credit format. The general ledger balances are used to generate all financial statements, calculate NAVs, and export to downstream systems.
Reallocations can be run ad hoc or on a scheduled basis. If something is allowed to cause a change to the allocation ratio, the system will recalculate the ratio and rerun the allocations.
Fund of Funds
Eagle's Accounting solution supports fund of fund structures and their associated processing. A fund of funds is a fund or portfolio that invests in other unitized funds or portfolios as its primary investment vehicle. Just as a mutual fund invests in a number of different securities, a fund of funds holds shares of many different mutual funds and in some cases other asset types. These funds provide greater diversification than traditional mutual funds. Key features include the ability to:
- Set up assets as a security master representing daily and periodic distributing mutual funds.
- Define a master fund as "held as an asset" by other master funds.
- Feed underlying fund income to each fund of fund holder.
- Feed an underlying fund NAV as a security price to each fund of fund holder.
Eagle's Control Center provides several edit tests designed to support fund of fund processing.
Capital Stock
As mentioned previously, the system supports multi-class funds with no limit to the number of classes. Capital stock by class is typically fed into the Eagle system as a subscription and/or redemption on whatever frequency is required. This data is used to calculate outstanding units for NAV calculation. The system can take feeds from third party record keeping systems to automate this process.
Features include:
- Capital stock subscriptions and redemptions
– Class level activity
– Automated updates of subledger and general ledger
– Tracking of outstanding and settled shares - Estimates processing
– Post and reverse the following day - Automated dilution
– Dilution amounts are automatically calculated on a daily basis
Fund Dividends
Eagle's Accounting solution supports multiple dividend distribution methods, including the following:
- Daily net investment income
- Daily fixed rate processing
- Accumulated distributions
- Periodic distributions
Distributions can be based on outstanding or settled shares and the system also supports breakage and mil rate adjustments and mil rate transfer calculations.
Expense Calculations
Eagle's Accounting solution allows you to set up recurring expenses that are booked to the fund based on various periodic bases, including daily, weekly, monthly, and semi-annually. The accrual amount can be specified as a fixed amount to be posted each day or period, or as a budgeted amount to be accrued over a defined length of time. You can book the expenses to individual share classes or the total fund. Fixed expenses can accrue on a daily, monthly, quarterly, semiannual, or annual basis.
Variable expenses are posted to the fund at either the total fund or share class level. Variable expenses are based on a percentage or basis points of the total net assets of the fund or share class. They are set up based on tiered currency unit structures with no more or less than a $.01 difference between adjoining levels. Tiers are specified as a percentage of total net assets entered as a decimal.
You can base variable expenses on the following net asset components:
- Prior day total net assets
- Adjusted net assets
- Average net assets
- Current day's settled shares
- Current day's shares outstanding
Variable expenses can accrue based on calendar or business days and can accrue on a daily, monthly, quarterly, semi-annual, or annual basis.
The system supports expense reimbursements that can be based on any of the above net asset components, as well as security based expenses, income based expenses, asset management fees, and retail management fees.
Control Center
Eagle's Control Center facilitates the management of the daily operations of a mutual fund accounting operation and is the desktop monitor for all fund related activity. Control Center centralizes the review of portfolio statuses and activity details, in addition to administering and handling system and business edit exceptions at the portfolio, group, and fund levels. Eagle's Control Center is delivered with over 400 standard edit tests and additional tests and work flows can be configured to meet specific needs.
The Control Center is designed to systemize operations processes. There are multiple levels of oversight. For example, fund accountants can be assigned to specific funds and tasks while their managers can have a dashboard view of overall operations. At the end of the processing cycle, all statuses need to be green to ensure that all processes have been completed successfully.