This section describes standard processing for benchmark relative fields and discusses the impact of report profile and entity level settings on processing.

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Standard Processing for Benchmark Relative Fields

You can include Dynamic Mutual Fund Returns fields set up to perform benchmark relative processing in standard Eagle OLAP reports (that is, Performance Analysis reports or Dynamic NAV Returns reports). When the system processes a benchmark relative field, the following operations occur:

1. Determine the benchmark assignment selected in the dynamic field. In this example, assume primary comparison index.

2. For each fund in the profile, determine the primary comparison index by looking at the fund/benchmark relationship defined in the Portfolio Data Center. Assume Fund 1 has a primary benchmark of Index 1 and Fund 2 has a primary of Index 2.

3. When retrieving price data for this field, use the benchmark entity information instead of the profile entity (retrieve prices for Index 1 & 2 instead of Fund 1 & 2).

4. Calculate a standard dynamic return using the benchmark prices:
   Invest $1,000 (buy shares) on the start date of the performance period.
   Reinvest any distributions (typically none for indices).
   Determine value on the last day of the period using accumulated shares multiplied by the price.
   Calculate return ((EMV/BMV) -1) * 100.

5. Display the return for Index 1 on the row for Fund 1 (and Index 2 for Fund 2).

The following figure shows sample OLAP report results for a benchmark relative return. In this report, the one year benchmark return for:

• Fund 1 is 6.25%. The system calculates this value using prices for the fund's primary benchmark, Index 1, even though Index 1 is not part of the report profile.

• Fund 2 is 3.25%. The system calculates this value using prices for the fund's primary benchmark, Index 2.

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How the Report's Use Entity History Setting Affects Processing

The way you set the Use Entity History option in the report profile can affect your results for benchmark relative fields. Processing that is aware of entity history is particularly important because funds can change their benchmarks over time.

Dynamic Mutual Fund Returns fields where you define a benchmark read through to the entity relationships to determine the appropriate benchmark and process accordingly. If the report has the Use Entity History check box:

• Selected (this option is selected by default), the report uses the benchmark associated with the fund as of the effective date of the report. If you select this option in the report profile, you must maintain the benchmark assignment on a historic basis.
  For example, if you run the report as of 12/31/2017, the report looks at the benchmark assignment as of that date. If you are not maintaining entity history, PACE cannot determine the relationship and therefore cannot calculate a return.

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• Cleared, the report looks at the most current benchmark assignment.

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Process Benchmark Returns that Reflect Benchmark Changes

When you assign a benchmark to a retail fund entity, the way you set the Process Across Changes option for the benchmark assignment can affect your results for benchmark relative fields if the retail fund's benchmark changes over time. The following examples illustrate how this works.

Assume you are calculating a 1 year benchmark relative return for Fund 1 as of 12/31/2017. Fund 1 had a primary benchmark of Index 2 from 1/1/2005 to 6/29/2017. Then on 6/30/2017, Fund 1 has its benchmark change to Index 1.
When the primary benchmark for the fund changes to Index 1 as of 6/30/2017, the  

The following figure shows how you set up the fund with a primary benchmark of Index 1 as of 6/30/2017 with the Process Across Change check box selected. Image Removed

AnchorRTF360030003000320031003a00RTF360030003000320031003a00Figure : Fund 1 - Benchmark Assignment Change ExampleImage Added

In your report, the performance period has a start date of 12/31/2006. At this point in time, the primary benchmark was Index 2. The performance end date is 12/31/1007, at which point the primary benchmark changed over to Index 2. If you selected the Process Across Changes option for the benchmark assignments, the system calculates the one year return as follows:

1. Invest $1,000 on 12/31/2016 using the price of Index 2.

2. From 1/1/2017 - 6/30/2017, reinvest any distributions (if applicable) for Index 2.

3. At the end of the day on 6/30/2017, determine the total market value of Index 2 (cumulative shares * end of day price).

4. Also on 6/30/2017, reset the share balance by "selling out" of Index 2 and buying shares of Index 1 using its end of day price as of 6/30/2017.

5. From 7/1/2017 - 12/31/2017, reinvest any distributions (if applicable) for Index 1.

6. On 12/31/2017, determine the final ending market value. Multiply the cumulative shares in Index 1 by its end of day price.

7. Calculate the return ((EMV/BMV)-1)*100.

The following table compares how the system retrieves benchmark data for various performance periods based on the Process Across Changes setting you select for each benchmark assignment. As described in the previous example, Fund 1 had a primary benchmark of Index 2 from 1/1/2005 to 6/29/2017. Then on 6/30/2017, Fund 1 has its benchmark change to Index 1.

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Display Benchmark Name and ID in Reports

When you use benchmark relative processing, you can set up Dynamic Mutual Fund Returns fields to show the benchmark name or ID in the OLAP report by using the Benchmark ID effect or the Benchmark Name effect, as described in Dynamic Mutual Fund Field Effects.

For example, if you set up a dynamic benchmark relative field for a primary benchmark that uses the Benchmark Name effect, the field on the report displays the name of the fund's primary benchmark.