Performance gross and net of management fees

[cir]

Can you please explain the best way to record and track management fees such that it easy to run individual client Portfolio Performance and other reports both gross and net of fees. Assume that the client pays management fees by check directly to my management company and thus the money is not taken out of the client's cash account. Thank you.

[Mark]

Hi cir,

Record these as "Account Fee" type distributions.

If they send in a check to pay, record this as a negative value, but do not check the "Reinvested" option, as they did not redeem shares to pay for the fee, they sent in a check. If cash was sold to pay the fee, then you would mark it as "Reinvested", and enter a negative number for shares equal to the value, and a price of 1.

You can control whether or not "Account Fee" type of distributions are factored into return calculations under "Options / General Preferences... / Yields / Include Account Fees in Yield Calculations". This is a global option, so applies everywhere when you set it.

[cir]

That seems to exclude the management fee from the "yield" but the portfolio "gain" is still being reduced by the amount of the account fee. Please advise?

[Mark]

Hi cir,

Yes, that is correct. There is no option to ignore account fees from the gain calculation, only yields.

[cir]

The only work around I can think of is to have two portfolios for each client. One that has account/management fees and one that does not. What do you think? Any other ideas?

[Mark]

Hi cir,

You could do that, although that is a lot of work. Another option would be to record the account fees in their own separate investment, and then either include/not that investment based on whether you want the fees included. It could look something like this:

Code: Select all

- Client John Smith (with fees)
  <investment for account 1 fees>
  - Account 1
    <investments for account 1>
  <investment for account 2 fees>
  - Account 2
    <investments for account 2>
- Client John Smith (no fees)
  - Link to Account 1
  - Link to Account 2

You can use "link" sub-portfolios to help here. These are a mirror image of whatever sub-portfolio you link them to, so you don't have data duplication.

[cir]

The work around I have been using is to create the management fee as an investment, as you suggested. When I want to run reports that exclude management fees I close the investment and when I want to run reports including the management fee I open the investment. This worked well until I moved computers and needed to move the fund manager data. When I restored the backup file it only restored open investments so I had to re-create the management fee investments and re-enter all the data. Is this what you would have expected?

Also, is there a way to include/exclude investments from report gain calculations without opening and closing them?

[Mark]

Hi cir,

Yes, only open investments are included in a backup. If you still have the closed investment file(s) on your old computer, you can copy them over manually.

Some options for excluding investments from reports are:

- Close them
- Move them outside the sub-portfolio you're reporting on
- Exclude them with a filter. Some reports allow excluding investments based on symbol. See the "Filter..." button in the Report Settings dialog.

One idea may be to include these management fee investments in multiple sub-portfolios. For example, you could have one "management fee" sub-portfolio where you keep them included always, and this sub-portfolio is outside the client sub-portfolios. You can copy them to the client subs when needed, and close them from only the client subs when you don't want them. You are opening the same investment in multiple sub-portfolios. This way it is always open in at least one sub-portfolio, and will be included in your automatic backups.