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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CurrentEffective: 1 November, 2012Categories: Composite ChangesSource: GIPS Handbook, 3rd Edition
One of the portfolios in our All-Cap Growth Equity Composite changed investment objective towards the end of the second quarter (client agreement date: June 21) from All-Cap ($300 million and above market cap) to Mid-Cap Equity ($1 billion to $10 billion). Should the portfolio be taken out of the All-Cap Growth Equity Composite for June, even though the portfolio’s investment objective only changed in the last nine days of the month? In talking to the portfolio managers involved, no changes were implemented during the short period because of the similarity of the two styles. Does the client’s investment objective change automatically exclude the account from being in the All-Cap Growth Equity Composite for June?
The firm must consider the circumstances surrounding the change in investment objective to determine when the portfolio will be removed from the All-Cap Growth Equity Composite. Shifts from one composite to another must be consistent with the guidelines set forth by the client. In this situation, if there was any latitude within the investment management agreement as to when the change should occur, the firm must determine when the change occurred and include the portfolio in the All-Cap Growth Equity Composite only through the last full measurement period that the portfolio was managed to the All-Cap Growth Equity strategy.
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