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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ArchivedEffective: 1 November, 2012 - 31 December, 2019Categories: CurrencySource: GIPS Handbook, 3rd Edition
Can a firm calculate performance returns for a composite that consists of multiple portfolios that are managed in several different currencies? If so, what conversion method should be used?
The GIPS standards require that firms disclose the currency used to express performance. In cases where a composite contains portfolios with different currencies, the firm must convert the individual portfolio returns to a single currency in order to calculate a composite return. In such an instance, the firms should disclose that the composite includes portfolios with different currencies that have been converted.
The GIPS standards do not recommend a particular way to convert performance from one currency to another. Two possible options for converting returns into a different currency are:
- when using the aggregate method of composite calculation, convert the underlying data (values and external cash flows) into the selected currency and then calculate the composite returns based on the converted values or
- when using the weighted average method of composite calculation, first calculate the individual portfolio returns and then convert the returns into the selected currency.
It is up to the firm to determine the composite-specific conversion method. Policies and procedures for converting returns must be established, documented, and applied consistently.
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