Manage Allocation Rules

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Last updated: Feb 23, 2024 by Nancy Cohn (Deactivated)
6 min read

If a master fund entity is allocating activity to a share class, you need to add a class allocation rule. The class allocation rule identifies the type of activity you are allocating, the class allocation method you are using to calculate allocation ratios, and the general ledger accounts in which the balances are to be allocated.

If a master fund entity is allocating activity to a sector, you need to add a sector allocation rule. The sector allocation rule identifies the type of activity you are allocating, the sector allocation method you are using to calculate allocation ratios, and the general ledger accounts in which the balances are to be allocated.

About Asset Allocation

Asset allocation is the process of dividing a master fund entity among major asset classes. The purpose of asset allocation is to reduce risk by diversifying the master fund entity.

Share Classes and Sectors

A master fund entity can have multiple share classes. A share class is a designation, usually alphabetic, given to a fund's shares. Typically, "A" class is used for front end load funds, "B" class is used for back end load funds and "C" class is used for level load funds. The costs associated with buying, holding, and redeeming the shares define the differences between the share classes.
In Eagle's Accounting solution, all classes are tracked as well as the original or total fund from which the amounts are allocated. The allocation ratios between the classes are calculated and the resulting ratios are then used to allocate the appropriate amounts. All figures are stored for reporting purposes.

A master fund entity can have multiple sectors as well as multiple share classes. The sectors represent investment strategies of the master fund entity and are usually run by different managers in an attempt to mitigate risk across the fund. All sectors are tracked. The allocation ratios between the sectors are calculated and the resulting ratios are then used to allocate the appropriate amounts. All figures are stored for reporting purposes.

Share Class Allocation Methods

Eagle's Accounting solution offers the following methods for allocating activity, such as income, expenses, capital gains/losses, and unrealized gains/losses, among the different share classes:

  • Relative Net Asset

  • Fair Value Settled Shares Outstanding

  • Shares Outstanding

  • Prior Night Net Assets

  • Settled Shares

  • Settled Shares without Prior Day Adjustment

  • Class Fixed Percentage

  • Relative Net Assets at Market Value

  • Current Day Adjusted Net Asset

  • Common Assets

Sector Allocation Methods

Eagle's Accounting solution offers two methods of allocating activity, such as cash, distributions, dividend reinvestments, expenses, redemptions, subscriptions, and short term investments, among the different sectors. These include Sector Percentage of Total Net Assets and Sector Fixed Percentage.

During sector allocation, the system allocates cash to transfer cash activity from the master fund to its sector funds to facilitate accurate reporting and mutual fund performance calculations at the sector level.

Create or Update Class Allocation Rules

In the Create/Update Allocation Rule panel, you can add and update a class allocation rule.

To create or update a class allocation rule:

  1. In Accounting Center, in the left navigation pane, click Setup > Fund Accounting > Allocation Rules > Create/Update Allocation Rule.
    You see the Create/Update Allocation Rule panel.

  2. In the Add or Update Allocation Rule field, specify whether you are adding or updating an allocation rule. 
    Options include:
    –  Add. Default. Used to create a new allocation rule and enter related rule criteria.
    –  Update. Used to enter additional rule criteria for an existing allocation rule. For example, after you add an allocation rule and assign a class activity type/method of Income and Class Fixed Percentage, you can update that allocation rule and assign a class activity type/method of Unrealized Gain/loss and Current Day Adjusted Net Asset.

  3. In the Chart of Account Name field, specify the name of the Chart of Accounts associated with the allocation rule.

  4. In the Allocation Rule ID field, specify the name of the allocation rule you are adding or updating.

  5. In the Sector/Class field, indicate whether you are adding or updating an allocation rule for a sector or share class. 
    If you are adding an allocation rule for a share class, select Class. Otherwise, if you are updating an existing class allocation rule, this field is locked, and displays Class.

  6. In the Activity Type field, if you set the Sector/Class field to Class, this field specifies the type of activity you are allocating among the different classes. 
    Options include:
    –  Capital Gain/Loss
    –  Expense
    –  Income 
    –  Intraday
    –  Unrealized Gain/Loss
    You can also add your own activity type for classes.

  7. In the From General Ledger Account field, specify a beginning general ledger account for the allocation rule. 
    The system applies the rule to a range of accounts based on the From General Ledger Account and To General Ledger Account fields.

  8. In the To General Ledger Account field, specify an ending general ledger account for the allocation rule. 
    The system applies the rule to a range of accounts based on the From General Ledger Account and To General Ledger Account fields.

  9. In the Class Method field, specify the method of allocating activity among the different share classes for the allocation rule. 
    Options include:
    –  Relative Net Asset.
    –  Fair Value Settled Shares Outstanding.
    –  Shares Outstanding.
    –  Prior Night Net Asset.
    –  Settled Shares.
    –  Settled Shares Without Adjustment.
    –  Class Fixed Percentage. If you select this value, you need to add a fixed allocation percentage for the share class. For more information, see Manage Fixed Allocation Ratios.
    –  Relative Net Asset at Market Value.
    –  Current Day Adjusted Net Asset. Incorporates dilution activity into the allocation ratio.
    –  Common Assets. Calculates allocation percentage using class-level prior night net assets + current day capstock - current day dilution from capstock transactions. Retrieves dilution from the SUBSCRIBE_REDEEM table from each subscription and redemption row for the current accounting date.

  10. In the Class Allocation Adjustment Rule field, you can select a class allocation adjustment rule.
    This rule excludes a specified ledger balance from the total net assets calculated to derive a common asset amount for each share class. This field is available only if you choose a Class Method based on total net assets, that is, you select Relative Net Assets, Prior Night Net Asset, Relative Net Asset At Market Value, Current Day Adjusted Net Asset, or Common Assets.

  11. Click Submit.

Create or Update Sector Allocation Rules

In the Create/Update Allocation Rule panel, you can add and update a sector allocation rule.

To create or update a sector allocation rule:

  1. In Accounting Center, in the left navigation pane, click Setup > Fund Accounting > Allocation Rules > Create/Update Allocation Rule.
    You see the Create/Update Allocation Rule panel.

  2. In the Add or Update Allocation Rule field, specify whether you are adding or updating an allocation rule. 
    Options include:
    –  Add. Default. Used to create a new allocation rule and enter related rule criteria.
    –  Update. Used to enter additional rule criteria for an existing allocation rule.

  3. In the Chart of Account Name field, specify the name of the Chart of Accounts associated with the allocation rule.

  4. In the Allocation Rule ID field, specify the name of the allocation rule you are adding or updating.

  5. In the Sector/Class field, indicate whether you are adding or updating an allocation rule for a sector or share class. 
    If you are adding an allocation rule for a sector, select Sector. Otherwise, if you are updating an existing sector allocation rule, this field is locked, and displays Sector.

  6. In the Activity Type field, if you set Sector/Class to Sector, this field specifies the type of activity you are allocating among the different sectors.
    Options include:
    –  All
    –  Cash
    –  Distributions
    –  Dividend Reinvest
    –  Expenses
    –  Redemptions
    –  Sector Catch All"
    –  Short Term Investment
    –  Subscriptions
    You can also add your own activity types for sectors.

  7. In the From General Ledger Account field, specify a beginning general ledger account for the allocation rule. 
    The system applies the rule to a range of accounts based on the From General Ledger Account and To General Ledger Account fields.

  8. In the To General Ledger Account field, specify an ending general ledger account for the allocation rule. 
    The system applies the rule to a range of accounts based on the From General Ledger Account and To General Ledger Account fields.

  9. In the Sector Method field, specify the method of allocating activity among the different share classes or sectors for the allocation rule. 
    Options include:
    –  Sector Percent Total Net Assets
    –  Sector Fixed Percentage. If you select this value, you need to add a fixed allocation percentage for the sector. For more information, see Manage Fixed Allocation Ratios.

  10. Click Submit.

List Allocation Rules

In the List Allocation Rule panel, you can view a list of allocation rules for a given chart of account.

To list allocation rules:

  1. In Accounting Center, in the left navigation pane, click Setup > Fund Accounting > Allocation Rules > List Allocation Rule.
    You see the List Allocation Rule panel.

  2. In the Chart of Account Name field, specify the name of the Chart of Accounts associated with the allocation rules you want to view.
    You see the default value, STAR.

  3. In the Allocation Rule ID field, specify the name of the allocation rule you want to view. Or leave this field blank to view all rules that meet your criteria.

  4. In the Sector or Class field, indicate whether you are listing allocation rules for a sector or share class. 
    Options include Sector and Class.

  5. In the Activity Type field, if you set the Sector or Class field to Sector or Class, specify the type of activity you are allocating among the different sectors or classes that you want to view.

  6. Click Submit.
    You see information about the allocation rules that met your criteria in the List Allocation Rules tab in a report format and the Show All tab in a grid format.