Basis of Performance Reporting - Moving from Income Return to Total Return

Submitted by Admin on Thu, 07/15/2021 - 16:03

Funds (investments portfolios according to sources of funds) are progressively moving to the best practice of performance reporting on a total return basis from being reported on an income return basis, with the move being subject to availability of reporting resources and harmonization with progress on portfolio transition and existing financial statements reporting.

At present, Funds are being reported on the following basis:

Performance Reporting Level Fund I Fund W Fund P Fund T
Overall Income Return basis Income Return basis Mixed basis Total Return basis
Total Portfolio Level Income Return basis Income Return basis Income Return basis* Total Return basis
Asset & Asset-Class Level Income Return basis Income Return basis Total Return basis** Total Return basis

* The Fund P portfolio is reported based on the year-to-date (YTD) accounting rate of return (ARR) that is reported on in the existing financial statements reporting of Fund P; The benchmark for the reported portfolio ARR is the corresponding YTD ARR in the previous year
** At the Fund P portfolio constituent asset level, total return is calculated except for Held-To-Maturity (HTM) sukuk, for which valuation data is not available to enable proper total return calculation for HTM sukuk. HTM sukuk reporting using total return methodology ends up producing mostly only the income return of total return, since HTM sukuk are not valued based on accrued income and market prices, and instead are based on accrued income and the value of the sukuk after amortizing premiums paid or discounts received vis-a-vis par value at the point of investments, whereas gains or losses arising from market price movements are ignored; Given the limitation in HTM sukuk valuation for the purpose of total return reporting, and since HTM sukuk represent about 90% of all sukuk in Fund P, total return is only reported for the growth assets of the portfolio; No growth asset total return benchmarks are reported on, although the benchmarks may be used in the report to explain systemic factors affecting the performance of the growth assets