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IMMERSION 2016Conrad IndianapolisJune 22, 2016
ALTERNATIVES: Tracking Alternatives through the Private Equity and Hedge Fund Modules
Facilitators: Matt Fultz, Client RelationsDanny McNulty, Proteus
SESSION OBJECTIVES
Goals of this session:– Inform users of methods available in ATWeb for tracking and
accounting for alternative assets– Provide guidance on the requisite setup functionality – Provide guidance on best practices in ATWeb
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A System OverviewPrivate Equity Tracking
PRIVATE EQUITY TRACKING
Private Equity Tracking Required Setup for PE Module Private Equity Module Considerations for Private Equity Performance Private Equity Reporting K-1 Adjustments Questions
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PRIVATE EQUITY TRACKING
Two Methods to Track Alternatives in ATWeb:– Independently
• Transactions through Portfolio Module• Balance Sheet Line Items
– Private Equity Module in the Security Master• Tracked at a Quantity of 1 and Unit Value equal to the current Market Value• Single or multiple portfolios can be utilized with the ability to enter multiple
Commitments• IRR and XIRR calculations are available
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Two Steps to Enable the Private Equity Module:
REQUIRED SETUP: SECURITY CLASS AND SECURITY TYPE
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❶
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Add Private Equity Security Class
Associate the new Security Class with the appropriate Security Type
PRIVATE EQUITY MODULE
Unique data requires unique tools– Tracks Commitments, Calls and Distributions for multiple Entities or
Portfolios– Use for data containment, easy review and consistent data entry– Conduit by which journal entries and basis transfers are booked– Required for Private Equity Summary Report– Private Equity Details Query
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PRIVATE EQUITY MODULE
Commitments– Why do we need it?
• Call/Distribution Linking • PE data points
– Unfunded Calculations– Commitment Periods (expiration
date)
– What can go wrong?• Timing Considerations• Under Committing vs. Over-Calling
– Integrate Investors– What Happens with the GL?
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PRIVATE EQUITY MODULE
Calls– Commitment Selection– Integrated Bank Account– Private Transaction Expenses– Funding Date vs. Call Date– Integrate Investors– What Happens with the GL?
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PRIVATE EQUITY MODULE
Distributions– Commitment Selection– Integrated Bank Account– Income Account– Amounts
• Income• Return of Capital
– Percent Recallable• Affects Unfunded Calculation• Income has no effect
– Integrate Investors Liquidations
– Portfolio Transaction
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(ROC) X (% Recallable) = Increase in Commitment
CONSIDERATIONS FOR PERFORMANCE
Market Value Updates– Connection Between Market Values and Cash Flows
• Cash flows should align with market value adjustments• Inherent UG created by cash flows without market value adjustments
– Performance• IRR: Consistent, regular timing• XIRR: Irregular timing
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PRIVATE EQUITY REPORTS & QUERIES
Private Equity Summary– Sort by security class
• Valuation Level, Liquidity, Sector, etc..
– Consolidate Button• Reporting across multiple
entities/funds
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PRIVATE EQUITY REPORTS & QUERIES
Private Equity Details Query– Track PE Module activity within a date range– Columns on Query:
• Date• Entity• Security• Activity Type• Commitment• Call Amount
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• Call Amount• Call Expense• Total Call• Income Distribution• ROC Distribution• Total Distribution
ADDITIONAL INFORMATION
Zendesk: ATWeb Enterprise Tools Security Master Private Equity
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archway.zendesk.com
K-1 ADJUSTMENTS
Two Potential Processes: Determined by Quality of Information– Process 1: Valuations
• Mark to Market as received to adjust MV and UG• When K-1 is received:
– Book a single basis transfer against designated partnership income account; reclass income received throughout year from designated partnership income account to proper Income Statement line-items
Or– Book a single Basis Transfer for each Income Statement line-item entry (no need to
re-class)
– Process 2: Valuations and Distributions• Mark to Market as received to adjust MV and UG• Book distributions or journal entries to record partnership income• When K-1 is received:
– Re-class income from partnership income to proper Income Statement line-items.
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K-1 ADJUSTMENTS
Key Factors to Keep in Mind– Ownership changes
• Basis adjustments and income re-class will allocate at current ownership percentages, not historical ownership percentages
• Timing of contributions throughout year affect allocations of K-1 adjustments• If nested, all partners/owners must revert back to the same period to receive
new allocations– Solution 1: Revert and reclose– Solution 2: Utilize explicit allocations
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Tracking Hedge Fund Positions from within the Security MasterHEDGE FUND MODULE
HEDGE FUND MODULE
Required Setup Subscriptions, Redemptions and Transfers Reporting Special Considerations More Information on Zendesk Questions
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REQUIRED SETUP: SECURITY CLASS AND SECURITY TYPE
Hedge Fund System Security Class– Select Hedge Fund in System Class drop-down list
Associate the Hedge Fund Security Class to your Security Type
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REQUIRED SETUP: SECURITY CLASS/TYPE
Allows access to the Hedge Fund tab in the Security Master– If Hedge Fund tab is grey or unavailable, check the setup
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HEDGE FUND SUBSCRIPTION
Initial Subscription:– Funding Date: Journal Entry for Amount
• DR Portfolio Due To/From• CR Portfolio Cash
– Subscription Date:• Buy of Security: Quantity = 1, Total Cost = 0• Basis Transfer: DT/DF Tax Lot for Amount
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Second Subscription:– Funding Date: Journal Entry for Amount
• DR Portfolio Due To/From• CR Portfolio Cash
– Subscription Date:• Basis Transfer: DT/DF Tax Lot for Amount
HEDGE FUND SUBSCRIPTION
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Store Liquidity Restrictions (informational):– Lock-up Expiration, Penalty and Structure– Liquidity Frequency, incl. Semi-annual/Annual– Liquidity Notice requirement– Gate Provision
HEDGE FUND SUBSCRIPTION
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Store Fee Structure Detail (informational):– Management Fee– Performance Fee– Hurdle Rate– Highwater Mark
HEDGE FUND SUBSCRIPTION: SECURITY CLASS OPTIONS
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Leverage the Hedge Fund Class Options’ Value fields to automatically populate the Subscription tab values. Examples:
– Fee - Hurdle Rate – Investment - Gate Provision
HEDGE FUND REDEMPTION
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Allows for Full or Partial Redemptions:– Redeem from ‘Main’ or ‘Side Pocket’ accounts– Allows gaps between Redemption and Funding dates– Allocate to a single Subscription, multiple Subscriptions or spread across all– Full redemptions completely redeem and close the position
HEDGE FUND REDEMPTION
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Allows for Full or Partial Redemptions:– Define Holdback and Reserve provisions, along with dates received for both
dollar amounts– Retain Holdback and Reserve dollars in user-defined receivable accounts
until received: automated entries clear the receivable against Cash
HEDGE FUND TRANSFER
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Allows for transfers between Main Account, Side Pocket Account and Reserve Account
– No entries booked with a Hedge Fund Transfer
REPORTING
Open Positions reporting suite and queries Hedge Fund Liquidity report
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REPORTING: HEDGE FUND LIQUIDITY
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SPECIAL CONSIDERATIONS
Feedback is that Hedge Funds are tracked with a time weighted return
Migration from Private Equity:– In many cases, Archway can assist in migrating legacy hedge fund
positions out of the Private Equity tab– Contact Archway Support for more information
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ADDITIONAL INFORMATION
Zendesk: ATWeb Enterprise Tools Security Master Hedge Funds
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archway.zendesk.com
QUESTIONS?
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?