Prior Period Budgeted Expense Performance Fee Workflow Example

This example describe the expected workflow of a performance fee that has a rule type of Prior Period Budgeted Expense. It shows a monthly prior period budgeted performance fee.

Step 1. Set Up Performance Fee Rule

You set up a performance fee rule, including bounds, rates, min/max rate restrictions, fee approval option, and benchmark. 

The performance fee rule uses the information shown in the following table. Notice that the performance fee requires approval prior to posting.

Step 2. Set Up Performance Fee

You set up a performance fee to accrue a budgeted expense using the Create Performance Fee Expense panel. At the time of the fee setup, the return data is most likely not available. You create the fee rule in a pending status with a fee amount of 0.

The performance fee expense uses the information shown in the following table. 

Step 3. Accrue Expenses

At start of day on July 1, the Trigger Expense Accrual job is executed using the Start of Day Global Automated Event Wrapper event group. You have not yet input the fund and benchmark return data into Eagle Accounting. As a result, the system does not run the performance fee because it is still in Pending status.

Step 4. Input Returns for June 30

In the middle of the day on July 1, you input the June 30 return numbers into Eagle Accounting using the event associated with the Create Performance and Benchmark Data panel.

Step 5 Calculate Performance Fee Activity

You run the Performance Fee Activity Calculation event associated with the Calculate Performance Fee Activity panel. The event calculates the data in the following table, including fee rates, average net assets, and the fee amount for July.

The system saves this data to a performance fee activity table and links it to the performance fee rule by fee id and fee row instance. The system also saves the fee amount to the performance fee. The rule is still Pending. (If you set the Fee Approval status as AutoApproval, the system places the fee in an Active status instead.)

Step 6. Approve Performance Fee

You run the Performance Fee Approval event using the Approve Performance Fee panel. The panel runs the Performance Fee Calculation Query, returning the July fee rule and its associated calculation output data. You must then approve the rule by submitting the Performance Fee Approval event, which changes the rule from Pending status to Active status. You also have the opportunity to change the performance fee rate and performance fee end date on the performance fee rule if you want to adjust the calculated amount.

Step 7. Accrue Expenses

You execute the Trigger Expense Accrual job again manually. The performance fee posts $-184.69 for July 1. This number is calculated by dividing $-5,725.37 by 31 days in July.

At start of day on each subsequent day in July, the Trigger Expense Accrual job posts a performance fee of $-184.69 each day, with the last day in July posting the exact amount needed to reach $-5,725.37.

Step 8 July Fee Completes and System Adds August Fee Rule

During the accrual posting on July 31, the system updates the July fee rule to a Completed status. Additionally, due to the performance fee rule settings that follow, the system automatically adds a new performance fee rule for the month of August.

The August fee rule has the same values as the July rule, except the system resets the fee amount to $0.00, and again sets the status to Pending.

This process continues indefinitely for subsequent months until you modify the Accrual Update Option value on the latest fee rule to Manual, or until you close the fee manually using the Close Performance Fee Expense panel.