1.30.2 Age-based Rebalancing
This topic provides information on age-based rebalancing details.
The system will pick all parties, whose portfolios are mapped to age based rule. it will then compare the date of birth of individual parties with the age slab defined in the rule maintenance.
If party age matches the slab defined at the rule, then system will amend the party portfolio and map the Model portfolio (defined at rule maintenance) in portfolio mapping. Portfolio mapping amendment will be done ONLY for age based rules and not applicable for frequency based rules.
The system will trigger the rebalance process so that the current asset balance of the party will be rebalanced to the newly mapped Model portfolios instrument and assets.
Example for Age Based Rebalancing
Scenario:
Mrs. Grey (Party ID: INDPA00) in an individual investor opened her investment account on 01-Jan-2010 with portfolio LIFE_ANNUITY
Mrs. Grey selected model portfolio based on age, current model portfolio is MOD_20_39 and opted for age based rebalance rule AGE_PRU (rule details given below)
Age Rebalance rule is defined and the same is mapped to INDPA001
Any investments into LIFE_ANNUITY portfolio will be invested according to the asset allocation of model portfolio MOD_20_39 (Asset allocation details given below)
On Mrs. Grey birthday, system will check whether there her age is still in the same slab or there is change in applicable age slab.
System date in current scenario is 27-Mar-2019, where Mrs. Grey age will be 40, which falls on second slab according to age rule AGE_PRU, the system will amend the portfolio mapping of Mrs. Grey and map the Model portfolio as MOD_40_49
Post successful amendment, system will do rebalancing of portfolio matching the resultant portfolio for the new age slab MOD_40_49
The system will compute and pass the required Rebalance adjustment outflow and Rebalance adjustment inflow orders in the system.
Every rebalance for a portfolio will have a unique rebalance reference number which will be auto generated by the system.
Party details
System Date: 27-Mar-2019
Table 1-44 Party details
| Party ID | Party name | DOB | Party Role | Employee ID | Account ID |
|---|---|---|---|---|---|
| INDPA001 | Mrs. Grey | 27-Mar-79 | Investor | NA | IN20150210000001 |
MOD_20_39 asset allocation: (Portfolio Definition)
This portfolio created in portfolio definition screen (PADPFDFN)
Table 1-45 Portfolio ID details for MOD_20_39 asset allocation
| Portfolio ID | MOD_20_39 |
|---|---|
| Model portfolio | Yes |
Table 1-46 Instrument details for MOD_20_39 asset allocation
| Instrument | Instrument Ratio | Asset | Asset Ratio |
|---|---|---|---|
| INS_1 | 22.59% | ASSET1 | 38% |
| ASSET2 | 62% | ||
| INS_2 | 39.56% | ASSET1 | 50% |
| ASSET2 | 50% | ||
| INS_3 | 37.85% | ASSET4 | 100% |
MOD_40_49 asset allocation: (Portfolio Definition)
This portfolio in portfolio definition screen (PADPFDFN)
Table 1-47 Portfolio ID details for MOD_40_49 asset allocation
| Portfolio ID | MOD_40_49 |
|---|---|
| Model portfolio | Yes |
Table 1-48 Instrument details for MOD_40_49 asset allocation
| Instrument | Instrument Ratio | Asset | Asset Ratio |
|---|---|---|---|
| INS_1 | 23.00% | ASSET1 | 50% |
| ASSET2 | 50% | ||
| INS_2 | 27.00% | ASSET3 | 50% |
| ASSET4 | 50% | ||
| INS_3 | 38.00% | ASSET4 | 100% |
| INS_4 | 12.00% | ASSET5 | 100% |
Portfolio Mapping before rebalancing
Portfolio Mapping for Mrs. Grey for the portfolio LIFE_ANNUITY where model portfolio MOD_20_39 is mapped in portfolio mapping screen (PADPFMAP)
Table 1-49 Portfolio Mapping MOD_20_39 for Mrs. Grey
| Party Role | Investor |
|---|---|
| Party ID | INDPA001 |
| Account ID | IN20150210000001 |
| Portfolio ID | LIFE_ANNUITY |
| Model Portfolio ID | MOD_20_39 |
Table 1-50 Instrument details for MOD_20_39 for Mrs. Grey
| Instrument | Instrument Ratio | Asset | Asset Ratio |
|---|---|---|---|
| INS_1 | 22.59% | ASSET1 | 38% |
| ASSET2 | 62% | ||
| INS_2 | 39.56% | ASSET1 | 50% |
| ASSET2 | 50% | ||
| INS_3 | 37.85% | ASSET4 | 100% |
Rule definition
Following age based rule AGE_PRU is defined in Portfolio Rebalance Rule Detail (PADREBRL)
Table 1-51 Age based - Rule definition
| Rebalance Rule ID | AGE_PRU |
|---|---|
| Rule Type | Age |
Table 1-52 Slab sequence details
| Slab sequence No | From Age | To Age | Model Portfolio ID |
|---|---|---|---|
| 1 | 20 | 39 | MOD_20_39 |
| 2 | 40 | 49 | MOD_40_49 |
| 3 | 50 | 60 | MOD_50_60 |
| 4 | 61 | 69 | MOD_61_69 |
| 5 | 70 | 80 | MOD_70_80 |
Rebalance Rule mapping
Following age based rule AGE_PRU is mapped to Party Mrs. Grey in Rebalance Rule Mapping Detail ( PADREBMP)
Table 1-53 Rebalance Rule mapping
| Rebalance Rule ID | AGE_PRU |
|---|---|
| - | - |
Table 1-54 Portfolio details
| Portfolio ID | Party ID | Party Name | Account ID |
|---|---|---|---|
| LIFE_ANNUITY | INDPA001 | Mrs. Grey | IN20150210000001 |
| PER_PENSION | INDPA002 | Mr. John | IN20150210000002 |
Let’s assume Mrs. Grey’s current portfolio balance is as follows:
Table 1-55 Instrument details for Mrs. Grey’s current portfolio
| Instrument | Instrument Ratio | Asset | Asset Ratio | Units | Asset NAV | Amount |
|---|---|---|---|---|---|---|
| INS_1 | 22.59% | ASSET1 | 38% | 100 | 10 | 1000 |
| ASSET2 | 62% | 150 | 11 | 1650 | ||
| INS_2 | 39.56% | ASSET1 | 50% | 232 | 10 | 2320 |
| ASSET2 | 50% | 211 | 11 | 2321 | ||
| INS_3 | 37.85% | ASSET4 | 100% | 444 | 10 | 4440 |
| Portfolio balance | 11731 | |||||
As part of rebalancing, system will amend the portfolio mapping for Mrs. Grey and map the new portfolio, portfolio mapping screen post amendment will be as follows:
Table 1-56 Portfolio Mapping for MOD_40_49 post amendment
| Party Role | Investor |
|---|---|
| Party ID | INDPA001 |
| Account ID | IN20150210000001 |
| Account ID | LIFE_ANNUITY |
| Model Portfolio ID | MOD_40_49 |
Table 1-57 Instrument details for MOD_40_49 post amendment
| Instrument | Instrument Ratio | Asset | Asset Ratio |
|---|---|---|---|
| INS_1 | 23.00% | ASSET1 | 50% |
| ASSET2 | 50% | ||
| INS_2 | 27.00% | ASSET3 | 50% |
| ASSET4 | 50% | ||
| INS_3 | 38.00% | ASSET4 | 100% |
| INS_4 | 12.00% | ASSET5 | 100% |
Post rebalance process, system will compute the inflow and outflow units based on new model portfolio MOD_40_49 as follows:
Table 1-58 Inflow and Outflow units for MOD_40_49 post rebalance process
| Instrument | Instrument Ratio | Asset | Asset Ratio | Amount | Outflow | Inflow |
|---|---|---|---|---|---|---|
| INS_1 | 23.00% | ASSET1 | 50% | 1349.065 | 0 | 349.065 |
| ASSET2 | 50% | 1349.065 | 300.935 | 0 | ||
| INS_2 | 27.00% | ASSET1 | 0% | - | 2320 | - |
| ASSET2 | 0% | - | 2321 | - | ||
| ASSET3 | 50% | 1583.685 | - | 1583.685 | ||
| ASSET4 | 50% | 1583.685 | - | 1583.685 | ||
| INS_3 | 38.00% | ASSET4 | 100% | 4457.78 | 0 | 17.78 |
| INS_4 | 12.00% | ASSET5 | 100% | 1407.72 | 0 | 1407.72 |
| - | - | - | - | 11731 | 4941.935 | 4941.935 |
For the above computation, its required to generate one outflow order for 4941.935 and an inflow of 4941.935 under LIFE_ANNUITY portfolio for Mrs. Grey.
The system will generate the orders and the same can be viewed in Pension Adjustment Order (PADAJORD) screen as shown below:
Post generation, user will not be allowed to modify/reverse the rebalance adjustment orders WD20150020001702 and IV20150020083605
Reference number of both inflow and outflow orders will be rebalance reference number (RB20150020083313)
Outflow Order
Table 1-59 Outflow Order
| Adjustment Order Number | WD20150020001702 |
|---|---|
| Order Type | Withdrawal |
| Party ID | INDPA001 |
| Account ID | IN20150210000001 |
| Portfolio ID | LIFE_ANNUITY |
| Order sub type | 14 - Rebalance adjustment pension withdrawal |
Table 1-60 Instruction details for Outflow order
| Reference number | RB20150020083313 |
|---|---|
| Instruction Date | 27-Mar-19 |
| Order Status | Order authorised |
Table 1-61 Instrument details for Outflow order
| Instrument | Asset ID | Order Mode | Order Value |
|---|---|---|---|
| INS_1 | ASSET2 | Amount | 300.935 |
| INS_2 | ASSET3 | Amount | 2320 |
| INS_2 | ASSET4 | Amount | 2321 |
| - | - | Total | 4941.935 |
Inflow Order
Table 1-62 Inflow Order
| Adjustment Order Number | IV20150020083605 |
|---|---|
| Order Type | Investment |
| Party ID | INDPA001 |
| Account ID | IN20150210000001 |
| Portfolio ID | LIFE_ANNUITY |
| Order sub type | 12 - Rebalance adjustment pension investment |
Table 1-63 Instruction details for Inflow order
| Reference number | RB20150020083313 |
|---|---|
| Instruction Date | 27-Mar-19 |
| Order Status | Rebalance Out-leg pending handoff/Allocation pending |
Table 1-64 Instrument details for Inflow order
| Instrument | Asset ID | Order Mode | Order Value |
|---|---|---|---|
| INS_1 | ASSET1 | Amount | 349.065 |
| INS_2 | ASSET3 | Amount | 1583.685 |
| INS_2 | ASSET4 | Amount | 1583.685 |
| INS_3 | ASSET4 | Amount | 17.78 |
| INS_4 | ASSET5 | Amount | 1407.72 |
| - | - | Total | 4941.935 |
Rebalance Adjustment Order Generation
Based on the difference in the ratio, the system will auto create Inflow and outflow orders for the portfolio in respective instruments and assets. There will be two orders generated for each successful rebalance process
The outflow order will be stamped with order sub-type 14 - Rebalance adjustment pension withdrawal with Order status as 1 - Authorised
The inflow order will be stamped with order sub-type 12 - Rebalance adjustment pension investment and Order status as 2 - Rebalance Out-leg pending handoff/Allocation pending
Balance Check - Adjustment Withdrawals
For adjustment withdrawals, the system will include the un-allotted withdrawal order amount as well as un-allotted switch-out orders pending allocation/ handoff
The system will consider the net of un-allotted order as available balance for withdrawals
The system will consider the withdrawal and switch orders with the following order statuses:
- 0 - order unauthorized
- 1 - order authorized
- 9 - order handoff pending allocation
- 14 - Order generated, Allocation pending
This validation is applicable for the following adjustment orders:
- 13 - Adjustment pension withdrawal
- 14 - Rebalance adjustment pension withdrawal
In case of insufficient balance, system will display an error message as E-NOASSETBAL - Insufficient balance for the asset <Asset ID> under the instrument <Instrument ID>.
These Rebalance adjustment investment and withdrawal orders will not be available in Investment Detail (PADINVDE) and Withdrawal Order (PADWITHD) screens. You can view these adjustment orders in Pension Adjustment Order (PADAJORD) screen. However, you cannot modify or reverse these Rebalance orders from Pension Adjustment Order screen.
Only view operation is supported for Rebalance adjustment orders
Reference number of the inflow and outflow orders will be stamped with Rebalance reference number, you can query the orders using rebalance number from summary screen
While generating withdrawal orders, the system will consider the un-allotted withdrawal and switch out leg orders which are pending allocation in TA.
Rebalance adjustment order handoff
The system will hand-off rebalance adjustment withdrawal orders to TA and get allotted. Once all the assets of the adjustment withdrawal is allotted, the system will mark the status of inflow order as 3-Payment cleared
Subsequent pension order handoff interface (PAS Order Export – Interface ID: IF20192130001003) will handoff the inflow order to TA and get allotted.
Rebalance Investment adjustment orders will not appear for clearing process (PADPYCLR - Payment Clearing).
You can verify the asset level allocation details in Allocation details sub-screen in adjustment order screen. If a party’s age is not matching with any slab, the system will log the following message in log table:
E-AGENOTELIGIBLE - Parties age is not eligible for rebalancing
For an age slab, the system maps the new portfolio and auto rebalance ONLY once and same will be repeated only in case of age slab change for the party, if picked up subsequently on next birthday of the party, the system will log the following error message and skip the party:
E-REBPROCESSED - Rebalancing already done for this party
The system will log the rebalancing status in PATB_REBALANCELOG in Status field.
In case of failures, error details will be logged into the PATB_REBALANCELOG log table with error code and description.
The system will not re-process failed or skipped rebalance records.
Parent topic: Pension Rebalancing Process