Create a Hedge Index Benchmark

You can create a Hedge Index custom benchmark to calculate index returns based on the assumption that the currency component of the source index return was hedged at the beginning of the period. The hedged returns are calculated with reference to the local return of the securities and segments of the source index and the base currency of the source.

For example, you can set up the Hedge Index to hedge the Domestic Equity Large Cap index 100% to British Pounds.

Verify the correctness of the source entity before creating the custom benchmark.

To confirm the accuracy of the source entity:

1. From any Eagle window, click the Eagle Navigator button to access the Eagle Navigator.

2. Enter Benchmarks in the Start Search text box. Click the Benchmarks (Performance Center) You see the Performance Center and the Benchmarks workspace with a list of entities.

3. Select the entity and click Edit.
   The Edit Entity Details workspace opens in a new tab.

4. Confirm that the Entity Base Currency and Entity Inception Date fields are correct. For example, if you choose to use the Hedge Index benchmark for data on 4/30/2004, then the Entity Inception Date must be less than or equal to 4/30/2004 with the proper base currency. If incorrect, make the necessary changes.

To create a Hedge Index benchmark:

1. Click Create New on the Home tab ribbon to create the custom benchmark to convert to another currency.
   The Create New dialog box appears.

2. Select Custom Benchmarks from the Select Policy drop-down list.
   The Select Custom Index Type drop-down list appears in the dialog box.

3. Select Hedge Index from the Custom Index Type drop-down list and click OK.
   You see the Create New Custom Benchmark wizard with the Details page displayed.

4. In the Details page, enter the Effective Date, Entity ID and Entity Name for the custom benchmark.

5. Select a value from the Entity Base Currency drop-down list.

6. Enter the Inception Date for the custom benchmark. This field is not required, but as a best practice, Eagle recommends entering an inception date that matches the effective date of the earliest definition (that is, the earliest date associated with data entered) for the custom benchmark.

7. Click Next.
   The Hedge Index page opens.

8. Enter the required fields.
   Source Entity Name. The source entity from the PERFORM database.
   Source. The source under which the source entity data is stored in the PERFORM database.
   Source Performance Model. The source dictionary under which the entity data is stored in the PERFORM When you select the source dictionary, the system displays the levels and sub levels associated with that dictionary in a grid at the bottom of the page.
   Percent Hedge. The amount of the currency to be hedged. Default is 100 percent.

9. Click Save.
   The custom index attributes information is saved in the database in the rulesdbo.custom_index_attributes table.
   Additional pages are available in the entity setup but they are not required for the custom benchmark setup.