Q & A Database

The GIPS Standards Q&A database contains questions and answers (Q&As) on various searchable topics that provide additional interpretation on an issue. Q&As are considered to be authoritative guidance and must be followed in order to claim compliance with the GIPS standards.

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Effective: 1 January, 2020

Categories: Cash Flow

Source: 2020 GIPS Standards

Please provide clarification concerning what is and is not considered an external cash flow.

When considering a portfolio, an external cash flow is capital (cash or investments) that enters or exits a portfolio. Expense payments are also considered external cash flows. Income receipts and transaction costs are not external cash flows. “External cash flow” may be defined by the firm as a single flow or an aggregate of a number of flows within a stated period of time. When considering sub-portfolios of a multiple asset portfolio, a manager-directed reallocation of assets between segments would be considered an external cash flow for that segment. Firms need to differentiate how external cash flows are treated in gross-of-fees and net-of-fees return calculations.

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