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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Archived

Effective: 1 November, 2012 - 31 December, 2019

Categories: Composite Changes

Source: GIPS Handbook, 3rd Edition

We currently have two composites in the small-cap growth universe. The guiding principles for managing the portfolios are the same, but the market-cap ranges differ on the low and high ends. One composite has stocks with market caps ranging between approximately $100 million and $1.0 billion. The other composite has stocks ranging from $500 million to $1.5 billion (with flexibility up to the largest stock in the Russell 2000 Growth Index).

We would like to expand, with client acceptance, the market-cap range for all accounts in each product to encompass the full range, essentially eliminating the need for two products. How do we approach this from a composite standpoint, assuming the clients have accepted this change and there is documentation of the change?

When a firm decides to combine the investment mandate, objective, or strategy of two (or more) different composites, the firm will create a new composite. The new composite will consist of all portfolios of the combined composites. The existing composites that the firm wishes to combine into this new composite will cease to continue. The new composite will not have historical performance results because the new composite’s strategy is newly implemented. The firm must include the terminated composites on the list of composite descriptions for at least five years after the composite termination date.

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