Allocation of investment earnings for large intra-month donation

ryandouglas

We receive monthly statements from our investment custodian with the monthly earnings/losses/etc. that are then put into CSuite to be allocated to our various funds. CSuite calculates the average daily balance of the fund and then assigns that fund a percentage of that month’s investment activity. Hypothetically, if a fund were to receive a large donation mid-month, then the average daily balance may be skewed and not accurately receive its fair portion of the month’s investment earnings/losses.

For example, if the first 15 days of the month the fund balance was $10,000, and then on the 16th, the fund receives a gift of $750,000, then the average daily balance for that month would be $385,000. If the month’s overall investment returns were negative (even though the second half of the month was a positive market), then that fund would be allocated the negative earnings based on the $385,000, even though the fund was only invested for the partial month (which happened to be positive).

Has anyone else ran into this situation? Does anyone have any workarounds or ways to make this more equitable? Policies/Procedures to address this?

Any help or input at all would be appreciated. Thanks!