How are Corporate Actions represented in LUSID?

LUSID has core support for automatically updating all portfolios which are affected by a mandatory Corporate Action.

A Corporate Action is an activity that a company elects to do which causes an economic change to the shareholders and/or bondholders of the company, ie which applies to all holders of an instrument at a particular point in time. Examples of common Corporate Actions are Stock Splits and Spin Offs.

LUSID allows the details of Corporate Actions to be uploaded into the system, and will then automatically apply then to any Portfolios which are configured correctly and hold the affected Instruments.

Loading of Corporate Actions

Corporate Actions uploaded to LUSID are loaded into a Corporate Action Source. These sources must be setup prior to use.

Each corporate action contains the following fields

  • Unique identifier
  • Announcement Date - see https://www.investopedia.com/terms/a/announcement-date.asp
  • Ex Date - see https://www.investopedia.com/terms/e/ex-date.asp
  • Record Date - see https://www.investopedia.com/terms/r/recorddate.asp
  • Payment Date - see https://www.investopedia.com/terms/p/paymentdate.asp
  • Input Transition - contains the Instrument that a Portfolio must hold to take part in the corporate action
  • Output Transitions - a list containing the results of the Corporate Action

Transitions

Transitions determine which Instrument is taking part in a Corporate Action, and what the effect of the corporate action is on holdings in that Instrument.

Fields

  • Instrument
  • Units Factor: The ratio of the units factor on the input Transition and the units factor on the output Transition is used to set or update the quantity of the output Instrument. A 2:1 stock split would be represented with Input Units Factor = 1, Output Units Factor = 2
  • Cost Factor: The ratio of the cost factor on the input Transition and the cost factor on the output Transition is used to set or update the cost on the holding in the output Instrument. A spin off where 20% of the cost is moving to a new company would be represented with Input Cost Factor = 1, Output Cost Factor = 0.8 for the original Instrument and Output Cost Factor = 0.2 for the spun-off Instrument

2 for 1 Stock Split for "Company A"

"For every share of Company A held, replace with two shares"

Input Transition:

  • Instrument: Company A
  • Units Factor: 1
  • Cost Factor: 1

Output Transitions:

  • Instrument: Company A
  • Units Factor: 2
  • Cost Factor: 1

Dividend of 35p per share of Company A

Input Transition:

  • Instrument: Company A
  • Units Factor: 1
  • Cost Factor: 0

Output Transition

  • Instrument: GBP
  • Units Factor: 0.35
  • Cost Factor: 0

Spin off of 1 new share in new Company B for every 10 shares in Company A, taking 20% of the book cost

Input Transition:

  • Instrument: Company A
  • Units Factor: 10
  • Cost Factor: 1

Output Transitions

  • Instrument: Company A
  • Units Factor: 10
  • Cost Factor: 0.8

  • Instrument: Company B
  • Units Factor: 1
  • Cost Factor: 0.2

Setup of Portfolios

To configure a Portfolio to use Corporate Actions, set the CorporateActionSourceId property on the Portfolio. This will cause all Corporate Actions which are loaded against the Corporate Action Source to be included in the Portfolios

Processing in LUSID

Assuming the setup described above is completed, the LUSID Movements Engine will automatically pull in corporate actions from the specified Corporate Action Source. They will be apply to the current holdings in the Portfolio on the ex-date, with payment applied to the account on the receive date.