Performance Report/Management Fee Issue

[elliots]

Mark,

You have an option in the Yields area about whether to include management fees in the calculation. That's fine, but it not only applies to the Portfolio Yield in the Performance Report (and probably other reports too) but also to the cash account within the portfolio from which the management fee is taken. You then get a result with a large negative return on the cash account which requires explanation*. In my opinion the management fee should never figure in the calculation for a single asset since it is attributable to the whole portfolio. (That would be different if it were a fee associated with a specific investment which should apply directly to that investment and not the whole portfolio (e.g., some custodians will carry, say, a partnership as a courtesy but charge a fee for holding it.)

Elliot

* It's particularly striking if there are multiple cash accounts invested in the same cash item within the portfolio -- you then get, say, 2 with the same 0.06% and one with -15%.

[Mark]

Hi Elliot,

Thanks for the feedback. I understand your point. On the other hand, everything is consistent today in that sub-portfolio yields are always just the combined yield of all their investments. Maybe a solution that works better here would be to create a new investment for tracking the management fees. That way, you could call the investment "Management Fees", or something like that. When you have a management fee, record it in this investment, and sell cash to pay for it. This way, you'll see a large negative yield (or you could hide this investment if you don't want it specifically listed, since it will maintain a $0 balance) in the "Management Fee" investment, but your cash will be normal.

[elliots]

Mark,

On the management fee issue. I have a cash account for management fees only as a separate sub-portfolio. I did a Transfer Out from the account where the fee money comes from, a Transfer In to the fee account, and a Management Fee reinvestment in the fee account. This cleaned up the Performance Report fee issue, but appears to have created an Executive Summary Issue. I now have the fee amount showing as Fees but also as Contributions, and double the fee amount as Withdrawals. It appears that the Transfers In and Out are inflating the Contribution and Withdrawal totals even though they are "internal" to the client level portfolio (which is the level of the report).

I guess the gross arithmetic is correct, but it looks confusing. The client added nothing to the portfolio and the fees were withdrawn. What I'd like to see is 0 contributions and the fee amount as withdrawals and fees. Can I do that? (I seem to recall a similar or related issue when you first introduced the Exec Summary report).

Elliot

[Mark]

Hi Elliot,

Transfers do get included in the Contributions/Withdrawals fields. If you use matching buy/sell instead they will not. For more on this, please read this:

http://www.fundmanagersoftware.com/help ... _flow.html

[elliots]

Mark,

I changed one pair of Transfer In/Out transactions to Purchase and Redemption and nothing changes on the report.

Elliot

[Mark]

Hi Elliot,

Try creating an "Investment Transactions" report, and turn on the "Filter..." to only show portfolio external contributions/withdrawals. This will help show where the external transactions are coming from.

[elliots]

Mark,

Ran the transaction report with the filter for External transactions. It's showing only the Tran In/Out from prior quarters and the Buy and Sell from this quarter.

My setup is: Client Level (that's where I'm running the report). Then there are 4 sub-portfolios (Joint Account, IRA, Roth IRA, and Management Fee). Each of contains a default cash account; that's the only thing in the Fee sub-portfolio. The money for the fee comes from the Joint account (previously used Transfer Out, but just tried a sell). I've been doing Transfer In to the fee account and just tried a Buy.

Elliot

[Mark]

Hi Elliot,

I see... Yes, movement of money between separate sub-portfolios will show up as external. One option you could consider is to have a management fee investment located in each of your 3 account sub-portfolios, and eliminate the 4th "Management Fee" sub-portfolio.

[elliots]

Mark,

I guess I'll live with it -- I'll write some explanatory text for the client.

It would seem to me possible to match two same value same dated transactions at the same level in the portfolio heirarchy and recognize them as internal (and consider unmatched transactions as external) when the report focus is at a higher level in the heirarchy, but then I'm not a programmer. Alternatively, there could be transactions codes for internal transfers (in and out), or a code for a purchase or sale that would force it to be recognized as external.

Elliot

[Mark]

Hi Elliot,

I agree that would be better. We'll look into improving this.

[elliots]

Mark,

Help me out -- I'm going crazy! I went back into the data in this situation and changed the buy/sell back to Tran In/Out to make it more consistent with my other data. The Tran In transaction no longer shows on the Exec Summary as a Contribution. I ran the Transaction report with the filter to only show external transactions and it shows up on this report -- but not on the Exec Summary. A second Tran In in the same cash account (with the same date, different amount) does show as a contribution. I've got a few hours into this already, any ideas as to what's going on?

Elliot

[Mark]

Hi Elliot,

Check what you have for the "OOP Cost Value" on your Transfer In. This is the amount used for the external cash flow.

[elliots]

Mark,

That was it -- I made it 0 and it showed up. I'm not sure I understand why.

Elliot

[Mark]

Hi Elliot,

The "OOP Cost Value" for transfer in transactions is what is considered "contributed". As you change the "OOP Cost Value" in a Transfer In transaction, the "Contributions" should change accordingly. See:

http://www.fundmanagersoftware.com/help ... _flow.html