FM needs to acknowledge settlement date ...

[modelerMike]

.. for it to move up as a first class PM tool

Cash will never be right if settlement is ignored for ANY transaction.
Bonds pay accrued interest based on SETTLEMENT DATE not trade date.

I realize ignoring settlement date made for easier programming logic; but what is the cost in terms of always having an annoying discrepency between real cash values and FM cash values that are degraded for ignoring settlement date.

Yes I can use the manual transaction loads and do it all myself including
a 'phantom-cash-trade-to-settlement-reconciliation' position to reconcile FM accounting with real World accounting.

FM has so much potential to improve with this change; it could help everyone involved; FM owners & users.

Dragomir Krgin has an excellent book that spells out all the gory details involved;

http://www.amazon.com/Handbook-Global-F ... 0471218359

[Mark]

Hi modelerMike,

Thanks for the feedback, this does help.

[BradN]

Hi ModelerMike,

Could you give me an example of your reconciling adjustment?

Thanks in advance,

Brad

[modelerMike]

Hi Brad ,

Exactly 1 year ago this was discussed in the following post;

"Handling DIST_D type trans in Generic Transaction loads."

You can get to it by searching for the word 'SYNCASH' on FM MB.

Glad to help.

Good day.

[modelerMike]

Good day Mark,

Back to another issue related to trade date versus settle date booking of transactions, this time in the realm of bond purchases and sales that I would appreciate getting your thoughts on.

If I book a bond buy or sale's related accrued interest transaction as of trade date
to be consistent with the associated buy or sell trade date, that is, booking the related DIST_I
transaction for the bond as of trade date and then book the related cash transaction when it occurs on settle date, does that create any performance inconsistencies between portfolio performance which is influenced by the cash flow occurring on settle date versus the bond's
performance which would be based on the DIST_I transaction as of trade date ?

Any thoughts or guidance appreciated.

Regards,

Mike

[Mark]

Hi Mike,

If you separate the interest transaction from the cash, this would be slightly different than if you recorded them on the same date. You will end up with all the same components in the yield equation, but it would be like there was more/less cash for those few days between trade and settlement, depending on whether the interest was received/paid. It is like the cash flowed in/out of the portfolio on the interest date, and then back out/in on the date you settle the cash.

If you want to look at it mathematically, see the ROI yield equation at:

https://www.fundmanagersoftware.com/hel ... s_roi.html

For the portfolio yield, in both cases, you will have a dist_x(1+i)^term_x and inv_y(1+i)^term_y. The term_x and term_y will be slightly different if they are a few days apart.

I wouldn't call this creating any inconsistencies. The portfolio is reporting the yield of all your investments in that portfolio. In the simplest case, this is your bond investment, plus cash. The difference is that in one case the cash is out of the portfolio for those few days.

[modelerMike]

Thank you Mark,
for your insights on performance impacts.

I'll simply book the DIST_I as of settle date and deal with the need to re-assemble it with
trade date bond buys or sells in order to re-create the original bond buy or sell transaction.
What I needed to understand for things to make sense here is that as of trade date, the security
starts or stops impacting portfolio value for buys and sells, while DIST_I transactions do not impact portfolio value until it is settled to cash. The DIST transaction amount will in most instances not have a value change between trade and settle, barring an intervening default.
I can live with that.

Good day,
Mike