Set Up Reference Data for Share Class Hedging
- Nancy Cohn (Deactivated)
- Kinga Huszno
Before a mutual fund entity can use the share class hedging process, you must identify the hedge share classes eligible for share class hedging processing. In addition, you must set up sector exclusions for the mutual fund entity.
Set Up Master Funds and Share Classes
To set up reference data for use with share class hedging, you must identify each share class that is eligible for share class hedging for each master fund. You can do so when you create a new master fund or when you create or edit a share class.
To enable share class hedging processing, you need to set up the Non-Base Capital Stock Mark To Market/Trade Date Settle Date G/L Indicator and Hedging Method options available in the Create Entity Share Class Information panel, the Edit Entity Share Class Information panel, and the Create Master Fund panel. A description of this option follows.
Option | Tag | Description |
|---|---|---|
Non-Base Capital Stock Mark To Market/Trade Date Settle Date G/L Indicator | 18045 | Determines how to allocate the mark to market (MTM) trade date to settle date gain/loss from non-base capital stock settlements across the share classes. Options include:
|
Hedging Method | 18451 | Determines a method for calculating and returning the hedge ratio in the Hedge Ratio report. This field appears when you set Non-Base Capital Stock Mark To Market/Trade Date Settle Date G/L Indicator to Allocate 100% to the Share Class Targeted. Options include:
|
For more information about setting up share classes, see Manage Share Classes and Create Entity Share Class Information Panel Options. For more information about setting up master funds, see Create Master Fund Entities and Create Master Fund Panel Options.
Set Up Sectors and Sector Exclusions
In order for a fund to convert to Eagle’s mutual fund accounting solution and process share class hedging:
You must set up the fund to have sectors. Each hedge share class must have its own sector where forward currency contracts will be traded and valued.
You must exclude the sectors as part of the share class allocation process. Otherwise, the unrealized and realized gains and losses from these forward currency contract holdings would be fully allocated to the hedge share class by the sector exclusion process.
In order to exclude a sector to one specific share class, first set up the sectors for the mutual fund. You must create a sector allocation rule, create sectors, and post sector allocations. For more information, see Manage Sector/Fund Information.
Then use the Create Sector Exclusion panel to designate the share class where all sector gains and losses will be fully allocated. Within this panel you can also add a termination date for the sector exclusion. If you enter a value of NULL for the termination date, then there is no end date for the sector exclusion. For more information, see Manage Allocation Exclusions.
An example follows. In the following two figures you can view the Create Sector Exclusion panel. The second figure shows the same two rows after you scroll the page to the right. In this example, for master fund FX45 you exclude sector SH75 for share class B. And you exclude sector SH756 for share class G. As a result, all gains and losses for forward currency contracts will be fully allocated to share class B for sector SH75 and share class G for sector SH76.
