The currency conversion benchmark allows you to convert the vendor-supplied index returns from your base currency to another base currency.
When using the currency conversion process in Performance reports, the Currency Process and Currency Type options must be set on the underlying PERFORM database fields. PACE prompts you to set them when creating or editing PERFORM database fields.

Calculate Returns

The following describes the logic used to calculate the currency conversion benchmark returns when there is a currency conversion set. To calculate the currency converted return, the process:

1. Retrieves the period begin and end exchange rates where the FROM currency equals the base currency of the source index and the TO currency equals the base currency of the target index.
2. Calculates the Currency Returns for the period.

Currency Return = (End Exchange Rate / Begin Exchange Rate) - 1

1. Converts Currency Returns to growth rates.

Growth Rate = (Currency Return/100) + 1

1. Converts Source Index Returns to growth rates.

Growth Rate = (Return/100) + 1

1. Multiplies the Source Index Return Growth Rate by the Currency Growth Rate over the period, and converts it into the Target Index Return.

The weight columns are copied from the source to the target index, there is no conversion required.
This data is described in the following table.

Currency Conversion Benchmark Example

For this example, assume the following currency conversion:
Source Index (USD BASE_CURRENCY)  Target Custom Benchmark (INR BASE_CURRENCY)
Data for the currency conversion benchmark source index is listed in the following table.

Resulting target data for the currency conversion benchmark is listed in the following table.

Complete the following:

1. Retrieve the begin and end exchange rates listed in the following table.

   Effective Date	INR	USD	Spot Rate
   4/30/2000	1457	1454	43.66
   5/31/2000	1457	1454	44.25

2. Calculate the Currency Return:

((44.25/43.66) – 1) * 100 = 1.351351

1. Convert the Currency Return into a Growth Rate:

(1.351351/100) + 1 = 1.013513

1. Convert Source Index Return to a Growth Rate:. For example, Total Return:

2.337513/100) + 1 = 1.023375

1. Multiply the Source Index Return Growth Rate by the Currency Growth Rate and convert into a return:

((1.013513 * 1.023375) –1)*100 = 3.7204

1. Weights are copied from the source data.

Configure a Currency Conversion Benchmark

You can create a custom benchmark with a type of Currency Conversion. In this example, the custom benchmark converts the Domestic Equity Index from USD to British Pounds.
To configure a currency conversion benchmark:

1. Verify that the base currency value was updated for the source entity. See the following figure.

Editing Entity – Entity Details Tab
To confirm this, find the source entity (the entity that currently exists in the PERFORM database that you convert to another currency.) From any Eagle window, click the Eagle Navigator button to access the Eagle Navigator. Enter Entities in the Start Search text box. Click the Entities (Performance Center) link. You see a list of entities.
Located in the Entity Details tab of the Editing Entity dialog box is the field for base currency. Ensure that the proper base currency is populated for the As Of date of the entity build. For example, if you choose to use the currency conversion benchmark for data on 4/30/2004, then ensure that an effective date less than or equal to 4/30/2004 exists in the Entity Details tab with the proper base currency.

Currency Conversion Benchmark Entity Info Tab

1. In the Entity Info tab, create the custom benchmark entity as shown in the previous figure.

• Set the entity Type to Custom Benchmark.
• Enter the entity ID and name information for the custom benchmark.

Editing Entity – Entity Details Tab

1. In the Entity Details tab:

• Populate the base currency field for the custom benchmark entity. See the previous figure.

This value is the target base currency. Ensure that the base currency exists on the correct asof date.

• 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 in the Custom Index Attribute tab) for the custom benchmark.

• Also, be sure you defined the Base Currency for the source index associated with this Custom Benchmark.

For more information about the currency conversion process, see Calculate Returns Using Currency Conversion.

Editing Entity – Custom Index Attributes Tab

1. In the Custom Index Attributes tab, define the following information. See the previous figure.

• Effective Date. The effective date of the custom index attributes definition when you save it in the database. In the Select Historical Date section, select one of the following options to identify the date for the attributes you are defining:
• AsOf today
• Use earliest holding date
• Use this value <DATE>

For additional information about the historical date options, see Set Up the Custom Index Attribute for Historical Date.When you edit the entity, additional options become available. For details, see Delete Custom Index Attributes.

• Save History. Allows you to save an "as of" definition to the database. The Finish button serves the same purpose.
• Type. The type of custom benchmark you are creating. Use a value of Currency Conversion.
• Source. Source under which the source entity data is stored in the PERFORM database.
• Source Dictionary. Source dictionary under which the entity data is stored in the PERFORM database.
• Entity. Source entity from the PERFORM database.
• Exchange Rate Source Rule. This option allows you to specify the Exchange Rate Source Rule that determines the spot rate used to convert the component Base Currency to match the Target Base Currency.

Ensure that the Source Rule includes a Foreign Exchange Source. The Foreign Exchange Source within the Source Rule is used to determine the spot rate.

• Date Rule. Does not apply for this type of benchmark.

1. In the Exchange Rate Source Rule field, select a current source rule to use for the exchange rates.

The source rule you choose should contain sources for Foreign Exchange. As an example, see the following figure.

Edit Source Rule – Foreign Exchange Source Rule
Below the Exchange Rate Source Rule field, the Custom Index Attributes tab displays the following fields for information purposes.

• Target Base Currency. Identifies the base currency to convert to. Displays the base currency you entered for the custom benchmark on the Entity Details tab.
• Source Base Currency. Identifies the base currency to convert from. Displays the base currency associated with the source entity selected on this tab.

If you do not indicate the currency, the fields display a value of Not Specified.

1. Click the Finish button.

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