IMMERSION 2016Conrad IndianapolisJune 22, 2016

PERFORMANCE VALIDATION: Understanding the ATWeb Performance Warehouse

Facilitators:Dean Craig, Implementation & ConsultingMatt Fultz, Client Relations

SESSION OVERVIEW

Introduce the ATWeb Warehouse Security-level Validation: Time Weighted, IRR and XIRR Complex Validation: Portfolio, Entity and Asset Class Nested Validation: Investor Lookthrough and Nested Equity Validation Example Common Pain Points Questions

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SESSION OVERVIEW

Nuts and bolts in ATWeb – not a “theory” session– Transactions, values and journal entries impacting Security and

Portfolio performance calculations– Application of ATWeb’s validation reports to performance reporting

Theory Session: GIPS Compliance: Application of the GIPS Standards to Asset Owners– 10:45 a.m. tomorrow, with Ted Argus, CIPM

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THE ATWEB WAREHOUSE

ATWeb data tables store:– Daily, security-level TWR performance detail and values

• Prior basis, income, position profit, sell profit, etc.

– Daily, security-level cash flows for IRR/XIRR– Profile ownership percentages for each Accounting Period

Warehouse does not store:– Return percentages over any period of time– Aggregate/roll-up values or returns– Daily investor ownership

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THE ATWEB WAREHOUSE

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Validation reports are the best visual representation of the ATWeb Warehouse.

THE ATWEB WAREHOUSE

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General Investment System Performance Calculation– Numerator

• ((Ending Market Value – Beginning Market Value) - (Contributions – Withdrawals))

– Denominator • (Beginning Market Value) + (Contributions – Withdrawals)

– Cash Flow handling will affect the calculation in regards to the begin of day vs. end of day

ATWeb Performance Calculation– General Ledger-based– Allows Archway to pull the same overall data but in finer detail– Doing so allows for easy identification of what investment components

are producing performance

COMPLEX VALIDATION EXAMPLE

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Test Case:– Client requests help validating the Fixed Income aggregate return– Cathie Roberts entity holds some of the positions, but others are

held through nested relationships

ATWeb Validation ReportingDirect Holding and Aggregation Validation

SECURITY-LEVEL VALIDATION

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View single-Security performance and data from within a single Entity

– Available for TWR and IRR/XIRR– No nested lookthrough – direct holdings only– IRR/XIRR: Excel IRR/XIRR Function– “Starting Point” for all other validation– Field definitions available in Zendesk

PORTFOLIO-LEVEL VALIDATION

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View Security Class Option performance aggregated at the Portfolio-level

– Available for TWR only– No nested lookthrough – direct holdings only– Portfolios within the Active Entity only

ENTITY-LEVEL VALIDATION

View Portfolio Class and Security Class aggregation from within a single Entity

– Available for TWR only– No nested lookthrough – direct holdings only– Each Entity presented individually

• Entity Class Options on different tabs• Consolidate across Entities

– Aggregated by Portfolio Class + Security Class

ENTITY-LEVEL VALIDATION

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VALIDATION: AGGREGATION (ENTITY-LEVEL)

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ENTITY CLASS PORTFOLIO CLASS OPTIONS

ENTI

TIES

ENTI

TY C

LASS

OPT

ION

ATWeb Validation ReportingInvestor-level and Nested Equity Validation

INVESTOR-LEVEL SECURITY VALIDATION

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View single-Security performance and data for a single position in a nested Entity

– Available for TWR and IRR/XIRR– No direct holdings – nested lookthrough only– Run from within the investor Entity (“Investor”)– Selection for Entity = nested Entity– Example: AAPL within Pearl Street Investments

NESTED EQUITY VALIDATION

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View nested Investor account performance– Available for TWR and IRR/XIRR– No holdings – Investor account-based return– Run from within the investor Entity (“Account”)– Selection for Portfolio = nested Portfolios– Validates nested account performance when “Look

Through Nested Entities” is unchecked

NESTED EQUITY VALIDATION IN REPORTING

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Time Weighted Validation (Nested Equity):Pearl Street Investments

Time Weighted Validation (Nested Equity):2009 Pearl Family Partnership

Statements – Client Performance Review by Security“Look Through Nested Entities”: unchecked

(2.20%)

(1.53%)

ATWeb Validation ReportingWorking Through a Complex Validation

COMPLEX VALIDATION EXAMPLE

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Test Case:– Client requests help validating the Fixed Income aggregate return– Cathie Roberts entity holds some of the positions, but others are

held through nested relationships

COMPLEX VALIDATION EXAMPLE

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Step 1: Confirm any newly opened positions from 6/1-6/30– Statements – Client Asset Allocation Comparison, 6/1/13-6/30/13

– Capture all Securities making up the return

No newly openedpositions

COMPLEX VALIDATION EXAMPLE

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Step 2: Understand scope of direct v. indirect exposure– Statements – Client Asset Exposure, 6/30/13

– Exclusions: Security Class = Asset Category; ALL except Fixed Income

COMPLEX VALIDATION EXAMPLE

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Step 2: Understand scope of direct v. indirect exposure– Twenty-one Fixed Income positions held directly by Cathie Roberts

• Security Performance – Time Weighted Validation (Entity Level)

– Three positions held in The 2009 Pearl Family Partnership Entity• Security Performance – Time Weighted Validation (Investor Level)

– Two positions held in Pearl Street Investments, LP Entity• Security Performance – Time Weighted Validation (Investor Level)

COMPLEX VALIDATION EXAMPLE

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Step 3: Generate Entity-level Validation for direct holdings– Security Performance – Time Weighted Validation (Entity Level)– Entity = Cathie Roberts; 6/1/13-6/30/13– Portfolio Class = Account Type; All Options– Security Class = Asset Category (original Class); Option = Fixed Income

COMPLEX VALIDATION EXAMPLE

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Step 4: Generate Investor-level Validation for indirect holdings– “Security Performance – Time Weighted Validation (Investor Level)”– One each for the five indirect/nested positions– Run from within Cathie Roberts Entity

Entity = Nested entity/partnership

COMPLEX VALIDATION EXAMPLE

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Step 5: Aggregate the six files together– Sum numerator and denominator for each day, across the reports– Compute the daily returns at the aggregate level; link for TWR

INDIRECT DIRECT AGGREGATION

COMPLEX VALIDATION EXAMPLE: SUMMARY

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Validation process can be involved and require multiple Validation Reports, often aggregated outside of ATWeb– Directly held Securities aggregated with indirect/nested holdings

Match Portfolio and Entity Level Validation Report selections to the parameter selections of the base report– Portfolio and Security Class Option selections– Exclusions v. Inclusions: double check Class Option Assignments

Detail in ATWeb’s Validation Reports allows you to track down the entry, price, trade or value at issue– In our example: large errant loss on 6/30/13 due to bad pricing

COMMON PAIN POINTS

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Management Fee paid on a low cash balance– When looking at performance at the security level and net of fees,

cash may show large losses– Check the performance by re-running the report gross of fees

Dividend paid on a low market value balance– When looking at performance on a security level, some stocks that

paid a dividend during the period may show large performance gains– This can happen when a sell occurs after Announcement/Ex-Date and

before Pay Date

COMMON PAIN POINTS

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Corporate Actions– Dependent on the type of action or the complexity

Misclassified Fixed Income Securities– Happens on occasions where a custodian classifies an Ultra Short

Bond as Cash and Equivalents– May cause market value issues and performance issues

ZENDESK – USEFUL INFORMATION

Documentation Help from Client Relations “What’s up with my performance numbers?”

Documentation ATWeb Reports & Queries Reports Performance Calculations and Disclosures

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archway.zendesk.com

VALIDATION REPORT SUMMARY

Security Performance – IRR/Time Weighted Validation– Direct single holding in the Entity; Portfolios on multiple tabs

Security Performance – …Validation (Investor Level)– Single holding within a Nested Entity; Portfolios on multiple tabs

Security Performance – …Validation (Nested Equity)– Daily return based on equity within Nested Entities

Security Performance – …Validation (Portfolio Level)– Aggregate Security Class returns within single Portfolios

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VALIDATION REPORT SUMMARY

Security Performance – …Validation (Entity Level)– Entity-level validation across Portfolio Class Options and Security

Class Options– Entity-Class Level: run Consolidated

Security Performance by Portfolio Class – IRR/Time Weighted Validation– Single holding in the Entity, aggregated by Portfolio Class Option

Security Performance by Portfolio Class – …Validation (Investor Level)– Nested single holding in a Nested Entity, aggregated by Portfolio

Class Option

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QUESTIONS

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Performance Validation: Understanding the ATWeb Performance Warehouse