PERFORMANCE DIGEST HEDGED CURRENCY FUNCTIONALITY

Transcription

1 A REVIEW OF INVESTMENT RISK & ANALYTICAL SOLUTIONS FOR INVESTMENT MANAGERS SUMMER 2012 PERFORMANCE DIGEST SUMMER 2012 TOPICS: HEDGED CURRENCY FUNCTIONALITY Northern Trust has enhanced performance reporting by launching the Hedge Currency Return functionality available in Fundamentals through the "Returns" tab. Return: Team Contacts: Currency exposure can have a significant impact on performance. A foreign investment is exposed to fluctuations in the Local / Base Exchange rate. This exposure can be hedged using Forward Rate Agreements (FRA) to insure against movements in exchange rate and gives a base return closer to the local return. The Hedge Currency functionality allows the user to calculate a Theoretical Return for their portfolio and the ability to analyze the cost of hedging rather than just looking at the ex currency (local) return Customised templates and Countries/Regions can be created to match your analytical/reporting needs. For example, China can be over written to use HKD rather than CNY Calculations can either be driven based off Portfolio or Benchmark exposure/weights and is based on monthly data Hedging factor is calculated as the arithmetic difference between the forward and spot return Hedged rate of return is calculated as the base return + hedging factor Report is fully exportable to PDF/ Microsoft Excel northerntrust.com Performance Digest Summer of 6

2 NORTHERN TRUST COMPOSITE MANAGEMENT SYSTEM (NTCMS): Return: Team Contacts: Investment Risk and Analytical Services continues to invest in the NTCMS infrastructure to enhance the user experience and expand the functionality of the product. We are pleased to announce several changes occurring throughout the remainder of this year. Read Only Access This popular request will allow Investment Managers to provide different levels of permissions to their users of NTCMS. Investment Managers can elect to provide users with read only access to the system where all composite information can be viewed including the running of Compliance and Audit reports. However, read only users are not able to alter any Composite definitions or associations, such as disclosures or altering the inclusion/exclusion of components within a Composite. White Label Report Branding Investment Managers will be able to control the look and feel of the Marketing and Compliance reports with the ability to alter the colors of bar charts, inclusion of report banners, client logos, and footers. PowerPoint Export Format In addition to PDF and Excel, the GIPS and Disclosure Reports can be exported to PowerPoint. GIPS Report Enhancements Recognizing the requirement to include disclosures in a GIPS compliant presentation, this development will provide the user the ability to automatically attach the Composite s disclosure report when the GIPS report is run. Additionally, the GIPS report will accommodate reporting an alternate category alongside the primary category. northerntrust.com Performance Digest Summer of 6

3 Disclosure Report Redesign A major redesign of the disclosure report will introduce four new sections, in a two column snaking format. The new sections present composite and benchmark descriptions in addition to a dynamically populated fee schedule table and benchmark weights table. Lastly, wild cards that embed referenced content into the body of disclosures will be supported. Return: Team Contacts: northerntrust.com Performance Digest Summer of 6

4 Return: Team Contacts: NAV RETURN REPORTING Where previously only master account returns of Northern Trust Fund Accounting clients were automatically fed into the Northern Trust performance engine, returns at a share class level can now also be reported through Fundamentals and Data Direct. Historically returns at share class level have always been supported by Northern Trust but were manually back loaded into the system. Unit price information at the share class level is captured at source from the Northern Trust Fund Accounting platform and is fed directly into to our performance engine, which then uses this information to generate returns. The flexibility of the engine means that official returns can be replicated regardless of the methodology. The functionality supports: Daily, weekly and monthly returns Both distribution and accumulation units Returns based on quoted or unrounded NAVs northerntrust.com Performance Digest Summer of 6

5 Return: Team Contacts: HEDGED INTERNAL RATES OF RETURN (IRR) Northern Trust now offers Return that can be viewed in Fundamentals under the Returns / Hedged Statistics selection. A Hedged IRR is composed of the IRR and a currency hedging factor. An IRR is a non linkable return for a discrete measurement period. A one month return requires the start market values, end market values, intra month flows and the day of the flows. The IRR methodology is particularly popular for measuring performance of Alternatives (such as Private Equity, Real Estate and Infrastructure) where a manager has little control over the timing of flows. These types of assets are often difficult to value on a daily basis and the timing of the cash flows is often not at the discretion of the manager making IRR a suitable measure of performance. IRR is an existing option available in Fundamentals. A Hedged IRR is calculated by adding a currency hedging factor to the IRR. The Currency Hedging Factor = the Forward Currency Return Spot Currency Return Hedged IRR = Base IRR + Currency Hedging Factor For further details please contact your IRAS representative. northerntrust.com Performance Digest Summer of 6

6 Return: Team Contacts: ASSET MANAGEMENT CONTACTS: SCOTT BACHMANN Head of EMEA Performance Measurement +44 (0) KETAN MISTRY Senior Consultant Investment Risk & Analytical Services +44 (0) DAVID DICKERSON Manager Investment Risk & Analytical Services (0) GARY CROMBIE Manager Investment Risk & Analytical Services +44 (0) JAMES NELSON Senior Performance Analyst Investment Risk & Analytical Services +44 (0) Northern Trust Corporation, Head Office: 50 South La Salle Street, Chicago, Illinois U.S.A., incorporated with limited liability in the U.S. The Northern Trust Company, London Branch (reg. no. BR001960), Northern Trust Global Investments Limited (reg. no ) and Northern Trust Global Services Limited (reg. no ) are authorised and regulated by the Financial Services Authority. The material within and any linked material accessed via this communication is directed to eligible counterparties and professional clients only and should not be distributed to or relied upon by retail investors. For Asia Pacific markets, it is directed to institutional investors, expert investors and professional investors only and should not be relied upon by retail investors. Northern Trust (Guernsey) Limited, Northern Trust Fiduciary Services (Guernsey) Limited, and Northern Trust International Fund Administration Services (Guernsey) Limited are licensed by the Guernsey Financial Services Commission. Northern Trust International Fund Administrators (Jersey) Limited and Northern Trust Fiduciary Services (Jersey) Limited are regulated by the Jersey Financial Services Commission. Northern Trust International Fund Administration Services (Ireland) Limited, Northern Trust Securities Services (Ireland) Limited and Northern Trust Fiduciary Services (Ireland) Limited are regulated by the Central Bank of Ireland. Northern Trust Global Services Limited has a Luxembourg Branch, which is authorised and regulated by the Commission de Surveillance du Secteur Financier (CSSF). Northern Trust Luxembourg Management Company S.A. is regulated by the Commission de Surveillance du Secteur Financier (CSSF). Northern Trust Global Investments Limited has a Netherlands branch, which is authorised by the Financial Services Authority and subject to regulation in the Netherlands by the AutoriteitFinanciëleMarkten. Northern Trust Global Services Limited has a Netherlands Branch, which is authorised and regulated in the Netherlands by De Nederlandsche Bank. Northern Trust Global Investments Limited has a Sweden branch, which is authorised by the Financial Services Authority and subject to regulation in Sweden by the Finansinspektionen. Northern Trust Global Services Ltd (UK) Sweden Filial is authorised by the Financial Services Authority and subject to regulation by the Finansinspektionen. Northern Trust Global Services Limited operates in Abu Dhabi as a Representative Office. Our registered office is authorised and regulated by the Central Bank of the United Arab Emirates. The Northern Trust Company operates in Australia as a foreign authorised deposittaking institution (foreign ADI)and is regulated by the Australian Prudential Regulation Authority. The Northern Trust Company has a branch in China regulated by the China Banking Regulatory Commission. The Northern Trust Company of Hong Kong Limited is regulated by the Hong Kong Securities and Futures Commission. Northern Trust Global Investments Japan, K.K. is regulated by the Japan Financial Services Agency. The Northern Trust Company has a Singapore Branch, which is a foreign wholesale bank regulated by the Monetary Authority of Singapore. The Northern Trust Company operates in Canada as The Northern Trust Company, Canada Branch, which is an authorised foreign bank branch under the Bank Act (Canada). Trustee related services in Canada are provided by the wholly owned subsidiary The Northern Trust Company, Canada, an authorised trust company under the Trust & Loans Companies Act (Canada). Deposits with The Northern Trust Company and its affiliates and subsidiaries are not insured by the Canada Deposit Insurance Corporation. IRS CIRCULAR 230 NOTICE: To the extent that this message or any attachment concerns tax matters, it is not intended to be used and cannot be used by a taxpayer for the purpose of avoiding penalties that may be imposed by law. For more information about this notice, see NORTHERN TRUST 2012 THE NORTHERN TRUST COMPANY northerntrust.com Performance Digest Summer of 6