Inquiry
On the recommendation of ***, I'm sending these questions here. I'd be extremely grateful for an opportunity to briefly interview the person managing the pension investment fund datasets:
1. While Period End Date specifies the end of the particular fiscal year, how can we determine at what date the decision to make a certain investment was made?
2. What does Maturity Date specify? Is this when the investment being made starts to give returns? What is the timeline for when the returns from the respective investment also cease? Is this the date when the investment stopped earning interest?
3. There is another date column in the dataset called Date_as_of, what does that specify? The data dictionary has no explanation for this column.
4. From the dataset definitions, I understand that Original Face is the value of the investment when it was made, and the Base Total Cost is the amount of money the city had to pay out of pocket to buy the investments at original face value. Is this correct? If not, please explain the relationship between these two columns.
5. From the dataset definitions, I understand that Base Market Value specifies what the investment was worth in the market on the last day of the fiscal year. Which column of data specifies the exact amount of returns the pension fund received on the respective investment based on the decision to sell the asset? In addition, what is the best way of calculating how long the fund decided to hold certain investments and the one it has continued to hold for a long time (like more than a decade)?
6. From the dataset definitions, I understand the Base Unrealized Gain/Loss, is calculated taking the Base Market Value (what it is worth now) and subtracting the Base Total Cost. But this would only indicate the "on paper" loss or gain from that investment. What would be the best method to determine the actual profitability of a certain investment?
Assigned Agencys Response
Please find our response below:
1. While Period End Date specifies the end of the particular fiscal year, how can we determine at what date the decision to make a certain investment was made?
- Those data are not available in this dataset.
2. What does Maturity Date specify? Is this when the investment being made starts to give returns? What is the timeline for when the returns from the respective investment also cease? Is this the date when the investment stopped earning interest?
- A maturity date is the date on which a financial instrument reaches the end of its contractual life. At maturity, the obligations specified in the contract are settled, such as the repayment of principal, the final payment, or the completion of any remaining contractual commitments. For fixed income investments, the maturity date generally marks when the issuer repays the principal (or face value) to the investor and makes any final scheduled interest payment, after which the security ceases to exist. At maturity date, all gains and losses incurred by an investment during the holding are fully realized and, for interest-bearing instruments, interest no longer accrues. For other instruments, the maturity date is the date on which the contract expires or is settled according to its terms. Depending on the type of instrument, settlement may involve a cash payment, physical delivery of an underlying asset, or termination of the contract with no further obligations.
3. There is another date column in the dataset called Date_as_of, what does that specify? The data dictionary has no explanation for this column.
- The “Data As Of” field in the file denotes the date at which the file was populated from the database. This is more of a version control tag: changes to any holdings attribute that occur between the Period End Date and the Data As Of date would be incorporated in this file.
4. From the dataset definitions, I understand that Original Face is the value of the investment when it was made, and the Base Total Cost is the amount of money the city had to pay out of pocket to buy the investments at original face value. Is this correct? If not, please explain the relationship between these two columns.
- Original face amounts are fields populated specifically for pass-through securities. A unique feature of pass-through securities is that coupon payments include both principal and interest components. Hence, the underlying principal outstanding for the security declines over time. The original face is the original principal amount of a pass-through security at the time it is issued, before any principal has been repaid. It serves as the baseline against which future principal repayments and the remaining outstanding balance (shown in the Shares/Par Value field) are measured. The Base Total Cost field represents the total amount of money the investor paid for the instrument as of the Period End Date. These portfolios utilize an average costing method that takes into account all historical lots of a given position. In addition, the cost amount for fixed income securities may be adjusted for amortization/ accretion of discounts/premiums and for principal paydown activity on pass-through securities.
5. From the dataset definitions, I understand that Base Market Value specifies what the investment was worth in the market on the last day of the fiscal year. Which column of data specifies the exact amount of returns the pension fund received on the respective investment based on the decision to sell the asset? In addition, what is the best way of calculating how long the fund decided to hold certain investments and the one it has continued to hold for a long time (like more than a decade)?
- Base Market Value represents the amount an investor would expect to receive were they to liquidate the position in an orderly manner at the market close of the Period End Date. This amount is expressed in the portfolios’ base currency, USD. There are no fields available in the holdings file that report performance at the holdings level, given the variability of the input set and the amount of transaction-level and time-series data required to perform the calculation. Finally, data for the holding period of individual investments is not publicly available, nor can we disclose managers’ intent to buy, sell, or hold individual positions.
6. From the dataset definitions, I understand the Base Unrealized Gain/Loss, is calculated taking the Base Market Value (what it is worth now) and subtracting the Base Total Cost. But this would only indicate the "on paper" loss or gain from that investment. What would be the best method to determine the actual profitability of a certain investment?
- That’s correct. The Base Unrealized Gain/Loss represents the unrealized gains attributed to each holding on the Period End Date, inclusive of currency gains & losses. To fully assess the performance of an investment over time, one would need to first define the period to be measured and then consider three components in the calculation: Income, Realized Gains, and Unrealized Gains. While it’s technically possible to aggregate the information necessary to calculate performance at the holdings level, it is not BAM’s practice to systematically do so for external managers and would balloon into a prohibitively large project if performed for all managers in the Plan.
