This article provides some insight into best practices for selling units when spending occurs, which depends on the spending rule type being used.

Not Selling Units

Pool level Spending rules (Percent to average of Pool, Percent to average of Unit price, Dollar amount per unit (DPU) or Proportional Allocation) need to have all funds participating to avoid the following: 

• A pool rule looks at the entire pool, if a fund doesn’t participate the other funds may be disproportionally charged for their spending calculation.

• The system will produce rebalancing values (usually to the largest fund in pool) to unrealized g/l’s to correct for Pool units X unit price = pool market value. 

If all funds participate in a spending rule and there are no exceptions, best practice would be to not sell units.

We can use a workaround for funds in a pool rule that should not spend by setting up spending exceptions that direct the system to include the fund in the calculation but then reinvest it back to the fund.

Selling Units

It is best practice to have distributions sell units when the spending rule is based on individual fund market values.  In this scenario, the spend DPU calculation is based on each specific fund.  This also allows more flexibility in assigning different spending rules/rates across pool and for setting up spending exceptions/distribution rules.