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Thread: Management Fee Invoice Handling

  1. #1
    P2F2 Member
    Join Date
    Jan 2011
    Location
    Minnesota
    Posts
    193

    Management Fee Invoice Handling

    Good morning. May we ask other P2F2 members how Investment Management Fee invoices received are handled and how calculation differences are resolved?

    Our team calculates investment management fees due to Investment Managers each quarter end. Fees are based on contractual terms and we provide an Investment Manager SOP Manual that includes calculation instructions. But, we do have differences primarily resulting from partial quarters as when a new manager joins us or from transfers between portfolios typically related to portfolio reallocations. In such cases, we revert to the actual number of days that funds are held.

    1) Do members have thresholds that cover immaterial differences such as rounding?
    2) How are under or over billings resolved?
    3) Are managers asked to submit corrected invoices?
    4) What documentation is typically provided to support payment differences?

    We would appreciate hearing about what works and what can be relatively easy to manage.

    Thank you,


    Ruth Ann “Ran” Jones, CPA
    Public Employees’ Retirement System of MS
    Investment Accounting Manager
    429 Mississippi Street
    Jackson, MS 39201
    rajones@pers.ms.gov
    Phone: (601) 359.2247
    Fax: (601) 359.1025

  2. #2
    P2F2 Member
    Join Date
    Jan 2011
    Location
    Minnesota
    Posts
    193
    Hi Ran,
    We recalculate all investment management fee invoices as well. We have a policy that we always use the custodian ending values for the calculation. Sometimes that needs to be amended within the manager’s contract as most default to their own valuation for the calculation. If the value(s) on the invoice do not agree to our custodian reports and it results in a difference greater than $10 in the calculation of the fee, we ask the manager to revise the invoice. But most of the time, even if the difference is less than the $10, we notify the manager that the valuations didn’t match so they can double check their internal procedures. If the difference is less than $10, especially if due to rounding, we just pay the invoiced amount. We have each manager’s fee schedule in a spreadsheet that we save with the invoice when we pay it for reference on any immaterial differences. I hope that’s helpful but feel free to contact me with any follow-up questions.

    Connie
    __________________________________________________ __________________________________________________ __________
    Connie L. Flanagan | Fiscal & Investment Operations Manager | ND Retirement and Investment Office | ND State Investment Board
    3442 East Century Avenue | PO Box 7100 | Bismarck, ND 58507-7100 | phone 701-328-9892 | fax 701-328-9897 | e-mail cflanagan@nd.gov

  3. #3
    P2F2 Member
    Join Date
    Jan 2011
    Location
    Minnesota
    Posts
    193
    Hello Ran,

    We here at NM PERA also have issues arise with the calculation and payment of investment management fees. We’ve created a spreadsheet with a worksheet for each manager that will calculate the fees due based on the fee schedule in each manager’s contract, after the associated market value at quarter-end is input to the worksheet. The fee schedules in our managers’ contracts state specifically that the market values to be used are those reflected by our custody bank, our book of record. This in particular avoids discussions surrounding which market values to use and makes the calculation process much simpler. At times we do have the need to adjust those market values based on partial quarter and/or reallocation of accounts and do so based on the number of days in the quarter the funds were managed. For example, an adjustment to a market value for an account that added $10,000,000 to the account on January 31st would be to subtract the prorated $10 million for the days in January the funds were not managed (because the market value at the end of March would reflect that addition); so the calculation would be $10,000,000/90 (days in Q1, assuming a non-leap year)x 30 (days the funds were not managed) = $3,333,333.33 (amount to subtract).

    I have added comments to your specific questions below, in red.

    I hope this was helpful!

    Have a great day,




    Christine Ortega
    Director, Investment Operations
    Public Employees Retirement Association (PERA)
    p: 505-476-9356
    a: 33 Plaza La Prensa Santa Fe, NM 87507
    w: www.nmpera.org
    e: Christinem.Ortega@state.nm.us

  4. #4
    P2F2 Member
    Join Date
    Jan 2011
    Location
    Minnesota
    Posts
    193
    Hello Christine,

    We have realized that we need to find a way to ensure that all our management fee disbursements are supported by manager invoices that “match” and have wondered how others make it happen. In the past, we always carefully calculated fees per contractual terms and specific instructions in a manual provided to our Investments Managers. Yet, there always seem to be differences especially with partial quarters or when portfolio realignment transfers occur.

    As you can imagine, it is so helpful to know what others do and your answers are outstanding.

    We thank you so much for what you have shared!

    Ran

    Ruth Ann “Ran” Jones, CPA
    Public Employees’ Retirement System of MS
    Investment Accounting Manager
    429 Mississippi Street
    Jackson, MS 39201

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