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.
Content from prior Q&As was included in the GIPS Standards Handbook as much as possible and many Q&As were archived. Change the Status drop-down filter to "Archived" to see the archived Q&As.
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ArchivedEffective: 1 December, 2013 - 31 December, 2019Categories: Wrap Fee PortfoliosSource: GIPS Executive Committee
Our firm manages both institutional and SMA portfolios. As of 1 January 2000, we began to claim compliance with the GIPS standards for our institutional portfolios. Given the guidance provided for wrap fee/SMA portfolios, we do not believe we can meet the requirements of the GIPS standards for our wrap fee/SMA portfolios as of 1 January 2006. Can we continue to exclude our wrap fee/SMA portfolios from our GIPS-compliant firm, so we may continue to claim compliance for our institutional portfolios?
The answer depends on how the firm holds itself out to the public. For purposes of claiming compliance, the GIPS standards define a firm as an investment firm, subsidiary or division held out to clients or prospective clients as a distinct business entity. A distinct business entity is defined as a unit, division, department, or office that is organizationally and functionally segregated from other units, divisions, departments, of offices and that retains discretion over the assets it manages and that should have autonomy over the investment decision-making process. Possible criteria that can be used to determine this include:
– Being a legal entity,
– Having a distinct market or client type (e.g., institutional, retail, private client, etc.), and
– Using a separate and distinctive investment process
In the situation described, provided the non-wrap fee/SMA division satisfies the definition of the firm guidance above, it is possible for the organization to separately define its institutional division as a distinct business entity that excludes its wrap fee/SMA division from the definition of the firm. This would not automatically jeopardize the organization’s claim of compliance with the GIPS standards. If the non-wrap fee/SMA (institutional) portfolio managers also manage the wrap fee/SMA portfolios, this structure would not necessarily prevent the firms from being separately defined. If the definition of the firm does not include the wrap fee/SMA division, the firm must not show performance from the wrap fee/SMA division in a compliant presentation except as supplemental information. For more information on supplemental information, please review the Guidance Statement on the Use of Supplemental Information.
Please also see original Q&A