Setting the System Default for Conversion Date
- Kavitha Thangaswamy (Unlicensed)
- Pamela Totas (Deactivated)
PACE supports conversions that may not occur on the anniversary date. For example assume 5 year conversions and a 7 year performance period as of 12/31/07. Here are the core dates for conversion purposes.
Start date = 12/31/2000
Anniversary date = 12/31/2005
End date = 12/31/2007
Although the 5 year anniversary date for this performance period is 12/31/2005, it is possible that the actual conversion might not occur (on transfer agent system) until a point in time after the anniversary.
PACE provides two system settings, Sys Item 14 and 15, that allow you to customize the calculation behavior in PACE. Note that the conversion period must occur on or after the anniversary date.
Sys Item 14 MFP Conversion Date Baseline
This represents the core assumption about when conversions take place. The following table describes the settings available for Sys Item 14.
Setting | Description |
|---|---|
NULL | Same as Anniversary. If you want the conversions to occur on the anniversary date, no action is necessary. A NULL setting tells PACE to always convert on the derived anniversary date regardless of the performance period or time of the month. Using the core dates in the prior conversion example, the conversion date falls on 12/31/2005. |
0 | Next Day. If the baseline is set to 0, the calculations use the very next calendar day. Using the core dates in the prior conversion example, the conversion date falls on 1/1/2006. Or if it is an ITD performance period starting 1/15/2001, the anniversary date is 1/15/2006; therefore conversion occurs on 1/16/2006. Note: if you always want to adjust the conversion date to the next business day after the anniversary date, you can use Sys Item 15 to specify a business calendar that determines the actual conversion date used. |
1 | First Day Next Month. If the baseline is set to 1, the calculations use the 1st day of the next month. Using the core dates in the prior conversion example, the conversion date falls on 1/1/2006. However in the case of an ITD return with an anniversary of 1/15/2006, the conversion occurs on 2/1/2006. Note: if you always want to adjust the conversion date to the first business day of the month after the anniversary date, you can use Sys Item 15 to specify a business calendar that determines the actual conversion date used. |
2 | Month End of Following Month. If the baseline is set to 2, the calculations convert on the month end date of the month following the conversion. Using the core dates in the prior conversion example, a 5 year anniversary on 12/31/05 means conversion on 1/31/2006. An anniversary on 1/15/06 means conversion on 2/28/2006. Note: if you always want to adjust the conversion date to the business month end of the month after the anniversary date, you can use Sys Item 15 to specify a business calendar that determines the actual conversion date used. |
3 | Day Adjusted Month End of Following Month. If the baseline is set to 3, the calculation converts on the month end date of the month following the conversion only if the month end date is a business day with a Daily flag selected in the business calendar specified in Sys Item 15. If that month end date occurs on a non-business day, the calculation uses the business calendar to convert on the next available business day that has a Daily flag. Using the core dates in the prior conversion example, a 5 year anniversary on 12/31/05 means conversion on 1/31/2006 if 1/31/2006 is a business day. Otherwise, if 1/31/2006 is not a business day specified in the business calendar, a 5 year anniversary on 12/31/05 means conversion on the first business day in February 2006, such as 02/01/2006. An anniversary on 1/15/06 means conversion on 2/28/2006 if 2/28/2006 is a business day. Otherwise, if 2/28/2006 is not a business day, an anniversary on 02/28/06 means conversion on the first business day in March 2006, such as 03/01/2006. |
If your funds do not convert according to any of these baseline behaviors, you can modify the behavior to adjust based on a business calendar.
Sys Item 15 MFP Conversion Calendar
Sys Item 15 allows you to set the source interface instance for any business calendar. The specified calendar is used to adjust the baseline derivation of the conversion date. If required, you can easily create a new calendar specifically for the purpose of supporting your conversions. For information about creating and maintaining business calendars, see the Business Calendar Quick Reference Guide.
As a configuration example, assume you need PACE to execute conversions on the 5th business day of the month following the anniversary date. Do the following:
Create a new calendar, Convertible Performance Calendar.
Pre-populate the 5th business day of each month.
Assume that 1/8/06 is the 5th business day of January 2006. This is the only day in that month that needs the daily flag to be set (assuming this calendar is only going to be used for convertible performance purposes).Set MFP Conversion Baseline (Sys Item 14) to 1 (First day of the next month).
Set the MFP Calendar (Sys Item 15) to the source instance that coincides with Convertible Performance Calendar.
When the 7 year convertible return is processed, PACE derives the 5 year anniversary date (12/31/05) and then because the baseline is 1 with the calendar set, it looks for the first BUSINESS day of the next month. In this case, since 1/8/06 is the first and only day set in the calendar for that month, the conversion occurs at the end of day 1/8/06.
Conversion Calendar Notes
Use of a business calendar is not supported for baseline = NULL because the conversion always occurs on the anniversary date.
Baseline 0 with a business calendar results in conversion on the next business day after anniversary date.
Baseline 1 with a business calendar results in conversion on the first business day of the month following the anniversary date.
Baseline 2 with a business calendar results in conversion on the business month end of the month following the anniversary date.
Baseline 3 assumes use of a business calendar, and results in conversion on the month end of the month following the anniversary date. If month end occurs on a non-business day, it results in conversion on the first business day in the month that follows the month end.
The following table shows examples of combinations of conversion baseline and business calendar. As you review these examples, assume that for Business Calendar Source 123, 12/31/06 and 12/31/06 fall on Sundays, which are non-business days, and assume that January 1st, New Year's day, is a non-business day.
Conversion - Baseline and Calendar Combinations | |||||
|---|---|---|---|---|---|
Convert on | MFP Conversion Date Baseline | MFP Conversion Calendar Source(Sys Item 15) | Behavior | If Ann date = 12/15/06 (12/31/06 is Sun) | If Ann date = 12/31/06 (Sun) |
Anniversary date | NULL | NULL | No adjustment, convert on ann date | 12/15/2006 | 12/31/2006 |
1st day after ann date | 0 | NULL | One day after ann date | 12/16/2006 | 01/01/2007 |
1st business day after ann date | 0 | 123 | 1st business day > ann date | ex 12/17/2006 | 01/02/2007 |
1st calendar day next month | 1 | NULL | Adj to 1st day of next month (since no BC set, it uses 1st calendar day) | 01/01/2007 | 01/01/2007 |
1st bus day of next month | 1 | 123 | Adj to 1st bus day of next month (where daily flag set for src 123) | 01/02/2007 | 01/02/2007 |
3rd (or Nth) bus day of next month | 1 | 123 | Adj to 1st bus day of next month where daily flag set for src 123 (client sets calendar) | 01/04/2007 | 01/04/2007 |
Calendar month end | 2 | NULL | Adjust to the first calendar M/E >= ann date | 12/31/2006 | 12/31/2006 |
Business month end | 2 | 123 | Adjust to first business M/E >= ann date (assume month flags set for 12/29/06 & 1/31/07 for examples) | 12/29/2006 | 01/31/2007 |
1st bus day of month that follows next month | 3 | 123 | Adjust to the first calendar M/E >= ann date and verify if M/E is Daily business day. Use business day M/E or Adj to 1st bus day of next month (where daily flag set for src 123). | 01/31/2007 | 01/31/2007 |