Our club uses the first of the month for its valuation. The
performance benchmarking tool uses the transaction date.
Due to this difference in dates, the benchmarking tool is
giving us invalid results. Is it possible to change the
date used by the benchmarking tool?

Bob Mann

I'm not sure I know the right answer here, but I thought I'd
try to provide a bit more context for the suggestion.

> Our club uses the first of the month
> for its valuation.

This club records member investments made mid-month using a
1st of the month valuation date. When recording member
payments, they use the 1st of the month as the "Member
Valuation Date" and a mid-month date as the "Transaction
Date".

> The performance benchmarking tool
> uses the transaction date.

Apparently, the Performance Benchmark report uses the
Transaction Date to make member investments into the
benchmark fund. Presumably, this is done because the
transaction date (not the valuation date) is when the funds
are actually available to the club to be invested. So, if
the club were really to invest in the benchmark fund it
would do so on the transaction date.

> Due to this difference in dates,
> the benchmarking tool is giving
> us invalid results.

In this club's situation, the IRR calculated for the club is
based on member investments made on the 1st of the month
(the valuation date) while the IRR for the benchmark fund is
(apparently) based on those same member investments made on
a mid-month date (the transaction date). Strictly speaking,
if the cash flows are not on the same dates the IRRs are not
comparable. (This is a potential issue anytime the
transaction date and the valuation date are different for
member payments.)

It seems to me that clubs using a valuation date weeks prior
to the transaction date are getting an unrealistic IRR for
their club anyway. (You can't actually invest in stocks
today using prices from 2-3 weeks ago!) The "fix" this club
is requesting is to change the Performance Benchmark report
so the benchmark fund IRR is based on the same unrealistic
assumption. That would make the IRRs more comparable (at
the cost of making them *both* unrealistic!).

BTW ... for clubs (like mine) where the valuation date and
the transacdtion date are the same for member payments
(i.e., the meeting date), it doesn't make any difference one
way or the other.

-Jim Thomas

<<
It seems to me that clubs using a valuation date weeks prior to the
transaction date are getting an unrealistic IRR for their club anyway.
(You can't actually invest in stocks today using prices from 2-3 weeks
ago!) The "fix" this club is requesting is to change the Performance
Benchmark report so the benchmark fund IRR is based on the same
unrealistic assumption. That would make the IRRs more comparable (at
the cost of making them *both* unrealistic!).
>>

I agree. As I stated to Bob, on compuserve, where this first came up, I
think it's a bad practice to have such a lag between the valuation date
and the actual deposit date. To me, the fix is to have the valuation
date shortly before the deposit date.

Rip West
Saint Paul, MN