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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Archived

Effective: 1 November, 2012 - 31 December, 2019

Categories: Carve-Outs

Source: GIPS Handbook, 3rd Edition

For periods prior to 1 January 2010, our firm used carve-outs for the Equity Composite, and allocated cash based on relative beginning-of-period assets. Generally, the percentage of carve-out assets in the Equity Composite was quite high. Beginning 1 January 2010, we have several portfolios that are solely invested in the equity strategy as a dedicated mandate, and due to the 1 January 2010 carve-out requirements, we are discontinuing the use of carve-outs with allocated cash in that composite. In this situation, can we link performance of the new, dedicated mandate portfolios to the previous performance history based on carve-outs? May we also show performance of the equity segment excluding cash?

In this example, the Equity Composite will continue because it includes all portfolios managed in that strategy; therefore, the performance of the new dedicated mandate portfolios must be linked to the previous performance history that includes the carve-outs. The carve-outs with allocated cash must be removed from the composite effective 1 January 2010. From that date forward this composite would only include portfolios that have a dedicated equity mandate. The performance of the equity-only segment may only be shown as supplemental information. Please see the sample presentation (PDF) for ABC Company’s Equity Composite for an example of how the firm may show the performance of that composite.

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