Create a Hurdle-Based Benchmark

You can create a Linked type custom benchmark that uses hurdle-based reporting. A hurdle-based benchmark allows you to build a benchmark with a return specified at a certain number of basis points relative to a source benchmark. For details, see “Calculating Returns for Hurdle Based Benchmarks.”

For example, in a  hurdle based benchmark Custom Index 3 is equal to 300 basis points above the Domestic Equity index.

To create a hurdle-based linked benchmark:

1. From any Eagle window, click the Eagle Navigator button to access the Eagle Navigator.
2. Enter Benchmarks in the Start Search text box.
3. Click the Benchmarks (Performance Center)

You see the Performance Center and the Benchmarks workspace with a list of entities.

1. Click Create New on the Home tab ribbon.

The Create New dialog box appears.

1. Select Custom Benchmarks from the Select Policy drop-down list.

The Select Custom Index Type drop-down list appears in the dialog box.

1. Select Linked from the Custom Index Type drop-down list and click OK.

You see the Create New Custom Benchmark wizard with the Details page displayed.

1. In the Details page, enter the Inception Date for the hurdle-based custom benchmark.
2. Enter the Entity ID and Entity Name for the custom benchmark.
3. Select a value from the Entity Base Currency drop-down list. If you are performing multicurrency conversion for the benchmark, Eagle’s best practice is to specify a base currency value in the Base Currency field.
4. Click Next.

The Linked Benchmark page opens. 

1. Change the default Type by clicking the Hurdle Rate radio button.
2. Select the Target Performance Model from the drop-down list.
3. Enter the number of basis points in the Annual Adjustment field and click the Adjust for compounding checkbox, if appropriate.

The grid at the bottom of the page shows the structure of the target dictionary selected.

1. In the target dictionary grid area, select the Total Level node of the target dictionary that you want to assign and double-click a cell.

The Total dialog box for the selected node appears.

1. Assign values for Entity, Source, Model, and Weight for the node, and click OK.
2. Click Save.

Additional pages are available in the entity setup but these pages are not required for the custom benchmark setup. The custom index attributes information is saved in the database in the RULESDBO.CUSTOM_INDEX_ATTRIBUTES table.

1. If the hurdle based benchmark’s source entity changes and/or the basis point adjustment criteria change, you can edit the Linked Benchmark and repeat this process to assign new criteria to the entity history as of the appropriate date for linking purposes.

Otherwise, you do not need to edit your criteria. If the custom benchmark continues to offset the Domestic Index Equity by 300 bps each year, you do not need to edit the entity, and the system restarts the offset each year.

If you update the entity information for each as of date on which the custom benchmark criteria changes, this tells the entity build program that the entity assignment has changed and on what effective date. For example, if the custom benchmark criteria changes to 350 bps above the Domestic Equity Index at some future date, you can edit the custom benchmark accordingly, and link the new custom benchmark criteria to the original custom benchmark criteria.