Mutual fund conversion and Corp Acquistion transactions cause Annual Return Error

Unknown

I have a mutual fund that recently converted to another one (specifically a Vanguard Investor fund that automatically converted to a Vanguard Admiral Fund).

In the past I used the Corp Acquisition transaction and everything seemed to work okay. I was excited to see that there is now a Mutual Fund conversion transaction and so I used that. However, the return information on the Portfolio page is not calculating correctly. I see N/A across the years and the total Returns for the account are way off....they are obviously too high.

I took a poster's advice and found the Remove transaction and in the Action column changed the total market value to the correct value. This did not fix the problem.

Therefore I deleted out the Mutual Fund conversion transactions (one Remove and several Additions) and tried the Corp Acquisition transaction but the same problem remains....even after changing the Remove transaction to the correct market value on the date of the conversion.

Is this just a bug that hasn't been fixed? Any workarounds?

I am using 2016 Premier Quicken on Windows 10.

Thanks!

Unknown

I am using Home & Business 2015 on Windows 7 and have experienced the same problem as Barbara. I got a
return of some 3.5 millions dollars associated with the removal of
the old mutual fund, which should rather be less than a thousand dollars.

q_lurker

@Barbara:  Sorry your post got "lost" until Michel turned it up.  

Both the MF Conversion or the Corp Acq result in effectively the same set of new transactions in your data file - Remove Shares and Add Shares.  There should be no difference on subsequent views and reports.

Entering different values in the market value field for the Remove shares can make a difference on reported information for the original holding, but will not have any impact for the new version of the shares.  I am mixed on exactly which value should go into that field.  

The portfolio views are not adept at processing this type of event on the security level.  They might get it right at the account level.  I suggest a better way to get proper performance values after this type of change is through the Investment Performance report.  That report offers broader customization of dates.  In using that report for Average Annual Return determination, you can specify both the old and new funds and report on both at once, not "by security".  For that report specifically, you may find that the Market Value field for the Remove Shares transaction should be the cost basis information for those shares (I believe the default value Quicken naturally inserts), such that on the date of conversion, you have a Remove dollar value of $X and the Add dollars values likewise add up to $X.  You have no net change on that date.  

Without more specifics on the Remove shares transaction, I cannot comment further on Michel Trunchon's issue.  That sounds to me as if the wrong values were entered somewhere along the line.

volvogirl

When my Vangurd funds changed to Admiral and if the price per share stayed the same I just changed the name and ticker symbol and left it there.

Unknown

q.lurker said:

@Barbara:  Sorry your post got "lost" until Michel turned it up.  

Both the MF Conversion or the Corp Acq result in effectively the same set of new transactions in your data file - Remove Shares and Add Shares.  There should be no difference on subsequent views and reports.

Entering different values in the market value field for the Remove shares can make a difference on reported information for the original holding, but will not have any impact for the new version of the shares.  I am mixed on exactly which value should go into that field.  

The portfolio views are not adept at processing this type of event on the security level.  They might get it right at the account level.  I suggest a better way to get proper performance values after this type of change is through the Investment Performance report.  That report offers broader customization of dates.  In using that report for Average Annual Return determination, you can specify both the old and new funds and report on both at once, not "by security".  For that report specifically, you may find that the Market Value field for the Remove Shares transaction should be the cost basis information for those shares (I believe the default value Quicken naturally inserts), such that on the date of conversion, you have a Remove dollar value of $X and the Add dollars values likewise add up to $X.  You have no net change on that date.  

Without more specifics on the Remove shares transaction, I cannot comment further on Michel Trunchon's issue.  That sounds to me as if the wrong values were entered somewhere along the line.

I may
have found a way out of this problem if not a solution.

Under
the tab Investing, I clicked on the customize button and
removed the “replaced fund” from the security list. I did the
same thing in the Investment Performance report. This produces
a reasonable average annual return in both places, which I believe to
be correct also. I was wandering whether I was not missing the
reinvested dividends of the “replaced fund” by so doing but the
answer is probably NO since they turn out as additional shares of the
new fund, in distinct entries corresponding to the reinvestments of
these dividends.

Jim_Harman

q.lurker said:

@Barbara:  Sorry your post got "lost" until Michel turned it up.  

Both the MF Conversion or the Corp Acq result in effectively the same set of new transactions in your data file - Remove Shares and Add Shares.  There should be no difference on subsequent views and reports.

Entering different values in the market value field for the Remove shares can make a difference on reported information for the original holding, but will not have any impact for the new version of the shares.  I am mixed on exactly which value should go into that field.  

The portfolio views are not adept at processing this type of event on the security level.  They might get it right at the account level.  I suggest a better way to get proper performance values after this type of change is through the Investment Performance report.  That report offers broader customization of dates.  In using that report for Average Annual Return determination, you can specify both the old and new funds and report on both at once, not "by security".  For that report specifically, you may find that the Market Value field for the Remove Shares transaction should be the cost basis information for those shares (I believe the default value Quicken naturally inserts), such that on the date of conversion, you have a Remove dollar value of $X and the Add dollars values likewise add up to $X.  You have no net change on that date.  

Without more specifics on the Remove shares transaction, I cannot comment further on Michel Trunchon's issue.  That sounds to me as if the wrong values were entered somewhere along the line.

This worked for me - Thanks!

Bob_L

I reported this problem with the mutual fund conversion about five years ago. Market values removed and added should of course be the same on the day of the conversion, therefore cancelling each other out on a cash flow basis. What happens is that the removed market value is calculated as the new market value times the number of shares removed, instead of the new market price times the number of shares of removed. You can sewe this in the report details. Apparently that result then gets written into the security record somewhere such that reversing the adds and removes does not fix it?



My recommendation is to restore a backup before the conversion was performed and then run the corp acquisition. If same security is in other accounts remove those add and remove transactions if it was not eligible for the conversion.

Unknown

Bob L said:

I reported this problem with the mutual fund conversion about five years ago. Market values removed and added should of course be the same on the day of the conversion, therefore cancelling each other out on a cash flow basis. What happens is that the removed market value is calculated as the new market value times the number of shares removed, instead of the new market price times the number of shares of removed. You can sewe this in the report details. Apparently that result then gets written into the security record somewhere such that reversing the adds and removes does not fix it?



My recommendation is to restore a backup before the conversion was performed and then run the corp acquisition. If same security is in other accounts remove those add and remove transactions if it was not eligible for the conversion.

Bob,
You are
absolutely right in your explanation. This is thus clearly a bug in
Quicken. It would be a lot simpler if Intuit corrected it. You said
that you reported this problem with the mutual fund conversion about
five years ago! What are they waiting for?

Bob_L

Bob L said:

I reported this problem with the mutual fund conversion about five years ago. Market values removed and added should of course be the same on the day of the conversion, therefore cancelling each other out on a cash flow basis. What happens is that the removed market value is calculated as the new market value times the number of shares removed, instead of the new market price times the number of shares of removed. You can sewe this in the report details. Apparently that result then gets written into the security record somewhere such that reversing the adds and removes does not fix it?



My recommendation is to restore a backup before the conversion was performed and then run the corp acquisition. If same security is in other accounts remove those add and remove transactions if it was not eligible for the conversion.

I have not tested this with 2017. What version are you seeing this in?


Edit: Oops see now that you are not running 2017...will test when time.

Bob_L

Bob L said:

I reported this problem with the mutual fund conversion about five years ago. Market values removed and added should of course be the same on the day of the conversion, therefore cancelling each other out on a cash flow basis. What happens is that the removed market value is calculated as the new market value times the number of shares removed, instead of the new market price times the number of shares of removed. You can sewe this in the report details. Apparently that result then gets written into the security record somewhere such that reversing the adds and removes does not fix it?



My recommendation is to restore a backup before the conversion was performed and then run the corp acquisition. If same security is in other accounts remove those add and remove transactions if it was not eligible for the conversion.

The problem still exists in QW2017.  Results of the test I ran are attached.  I ran the conversion first. Then I  deleted the Remove and Add transactions and ran it as a corporate acquisition with no problem, unlike what @Barbara reported

Will report it once again.

Bob_L

Bob L said:

I reported this problem with the mutual fund conversion about five years ago. Market values removed and added should of course be the same on the day of the conversion, therefore cancelling each other out on a cash flow basis. What happens is that the removed market value is calculated as the new market value times the number of shares removed, instead of the new market price times the number of shares of removed. You can sewe this in the report details. Apparently that result then gets written into the security record somewhere such that reversing the adds and removes does not fix it?



My recommendation is to restore a backup before the conversion was performed and then run the corp acquisition. If same security is in other accounts remove those add and remove transactions if it was not eligible for the conversion.

Note that as I understand it you need to have both securities in the performance report to get what is really the combined performance of two separate securities. For that same reason, the portfolio view is only going to produce the returns separately for each of the two securities, not the combined return. Think of them as separate securities even though for tax purposes the basis has been incorporated into the admiral shares.

q_lurker

Bob L said:

I reported this problem with the mutual fund conversion about five years ago. Market values removed and added should of course be the same on the day of the conversion, therefore cancelling each other out on a cash flow basis. What happens is that the removed market value is calculated as the new market value times the number of shares removed, instead of the new market price times the number of shares of removed. You can sewe this in the report details. Apparently that result then gets written into the security record somewhere such that reversing the adds and removes does not fix it?



My recommendation is to restore a backup before the conversion was performed and then run the corp acquisition. If same security is in other accounts remove those add and remove transactions if it was not eligible for the conversion.

@Bob L:  Appreciate the pics.  They look identical to me.  Did you attach the same one twice?

Also, you circled the two $6000 values in the return column as "Equal Market Values on Conversion Date".  IMO, the equal counteracting values are the first $6,000 in the Returns column with the following two $3000 values (equaling $6000) in the Investment column for the next two lines.  Those two out/in totals on the same date are what make the math work (i.e. no effect on the bottom line return due to the conversion).  The final $6,000 return is just coincidental in your data example.  

Bob_L

Bob L said:

I reported this problem with the mutual fund conversion about five years ago. Market values removed and added should of course be the same on the day of the conversion, therefore cancelling each other out on a cash flow basis. What happens is that the removed market value is calculated as the new market value times the number of shares removed, instead of the new market price times the number of shares of removed. You can sewe this in the report details. Apparently that result then gets written into the security record somewhere such that reversing the adds and removes does not fix it?



My recommendation is to restore a backup before the conversion was performed and then run the corp acquisition. If same security is in other accounts remove those add and remove transactions if it was not eligible for the conversion.

Yes my mistake with the pictures.  You are correct that maybe I should have circled the two investments but since it was all on the same day I wanted to make the point that it was market values that should be equal, and in the conversion case now attached to show how the wrong calculation was being made.

Unknown

Bob L said:

I reported this problem with the mutual fund conversion about five years ago. Market values removed and added should of course be the same on the day of the conversion, therefore cancelling each other out on a cash flow basis. What happens is that the removed market value is calculated as the new market value times the number of shares removed, instead of the new market price times the number of shares of removed. You can sewe this in the report details. Apparently that result then gets written into the security record somewhere such that reversing the adds and removes does not fix it?



My recommendation is to restore a backup before the conversion was performed and then run the corp acquisition. If same security is in other accounts remove those add and remove transactions if it was not eligible for the conversion.

I am using QW2016 Premier running under Windows 10 and not only having the same problems with using the Mutual Fund Conversion but the total addition of new shares does not match that entered.  I have had to go back and manually adjust the number of shares for the total to equal those being reported. I have been tempted to upgrade to QW2017 but will now wait.