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When you are setting up master funds for use with Net Investment Income as its daily distribution method, ensure you do the following. 

Update Master Funds

When you create or edit master funds that use a daily distribution method of Net Investment Income, ensure you review the master fund's Fund Distribution Fields settings. You can use the Create Master Fund panel or the Edit Master Fund/Sector panel. For a description of each option, see Set Up a Master Fund for Distribution Processing. 

Be aware that you must set up NII distribution rules in order to assign the Net Investment Income Rule value to the entity. For more information, see Create NII Distribution Rules.

Update Share Classes

When you set up master funds that use a daily distribution method of Net Investment Income, there are several options at the share class level that can also affect NII calculations. 

You can specify the Minimum Yield (tag 4992) for a share class when you update a share class. This value indicates the minimum yield that a daily distributing master fund entity must obtain. The system requires a minimum yield to process expense reimbursements. If the net investment income (NII) process calculates a yield below this threshold, it recalculates the distribution amount to equal this threshold. The system automatically posts the difference to a dividend expense reimbursement account. The minimum yield is reported as a percentage; however, you must enter it as a numerical value. You can also enter a value for this field using the multi-row pane on the Create Master Fund panel. 

You can select an NII Distribution Method (tag 11475) for a share class. This option etermines if the share class accumulates or distributes net investment income (NII). Options include:

  • Accumulate. Allows the share class to accumulate net investment income. When you calculate net investment income, the mil rate and yield are calculated for the share class, but the distribution is not posted to the ledger and subledger. You can use the Calculate Accumulated NII panel to post accumulated distributions.
  • Distribute. Allows the share class to distribute net investment income. When you calculate net investment income, the mil rate and yield are calculated for the share class, and the distribution is posted to the ledger and subledger.

For a description of all share class options, see Create Entity Share Class Information Panel Options.


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