Eagle Launches New Mutual Fund Tax Calculator

Eagle Investment Systems plans to offer Eagle PACE for Mutual Fund Performance, a performance tool that calculates after-tax returns on mutual funds as well as daily security and segment level returns, benchmark relative attribution and risk statistics.

According to Bruce Feibel, CFA and director of performance measurement technology with Eagle, the new tool was developed in response to rules the Securities and Exchange Commission (SEC) passed in January regarding how performance should be calculated and presented in advertisements and prospectuses.

"The issue is when you or I get into a mutual fund, when the fund pays a dividend, we're going to have to pay a tax on that dividend and if we sold the fund at a gain, you'd have to pay tax on that," he says, "so what the SEC proposed is that mutual fund companies should print those after-tax returns--the real return that you and I would have earned after tax--in those advertisements."

Changing the rules, says Feibel, changes the way fund companies have to calculate returns on a daily and monthly basis--PACE for Mutual Funds speaks to that new requirement.

The new system is a multi-layered, client/server system with an NT or Unix database (the system can run on Sybase, Oracle or Microsoft Sequel servers). The servers pull in the data from other systems, calculating returns and doing portfolio analysis. There are also various front-end Web-based client applications which are used to access information, request reports and query returns over time, says Fiebel.

Integration and pricing for the system, he says, are hard to specify given operating environments differ so widely, however, generally speaking inbound feeds would be comprised of the NAVs (net asset value) on the portfolios, distributions and portfolio holdings transactions.

Firms wishing to integrate the system into their existing technology infrastructure don't need much. Feibel says Eagle has three clients, which he would not name, beta testing the system--some run the entire system on one NT server and others which run it on multiple servers--it all depends on the users capacity requirements.

PACE for Mutual Fund Performance will be available in July with capabilities such as performance calculation for pre- and post-tax, post-tax on distributions and redemption of fund shares; front- and back-end loads; pre- and post-expenses; segment returns by country, sector, industry; daily security level returns; periodic time- and dollar-weighted returns and composite calculation and reporting.

Additional product capabilities will include performance analysis on benchmark comparisons; attribution analysis vs. benchmark; dynamic return currency conversion; CAPM and risk-adjusted return analysis and custom-blended benchmark creation.

Perhaps the most attractive characteristic of the system, contends Feibel, is its rules-based composition that allows for significant flexibility. Feibel adds, "There are lots of different kinds of twists with mutual funds with different kinds of loads, front-end load funds, back-end load funds, different kinds of expense structures so there's a very flexible way to get at that data and customize the return calculations for a specific fund group."