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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Effective: 1 November, 2012 - 31 December, 2019

Categories: Portability

Source: GIPS Handbook, 3rd Edition

Firm D and Firm J, each with a similar European Fixed Income Composite, decide to merge. The new merged firm, Firm DJ, will combine the investment management expertise and resources from both firms in order to offer one European Fixed Income strategy. To show a performance history for this collective composite, Firm DJ wants to combine the historical performance of the two similar composites. Can these historical track records be blended and shown in compliance with the GIPS standards?

No. Firm DJ cannot combine the history of the two pre-merger composites and show it as a presentation in compliance with the GIPS standards. Firm DJ must determine whether one of the historical composites can serve as the “surviving” composite. If there was a clear survivor, the surviving composite’s history must be linked to the ongoing record of Firm DJ’s new European Fixed Income Composite. The performance of the non-surviving composite should be made available upon request.

If there was no clear surviving strategy, the new European Fixed Income Composite would not have any performance history, as it represents a new strategy for the firm. The history of the styles at both Firm D and Firm J would be shown separately as supplemental information and, if not shown, should be made available upon request.

For instance, if the management of the new composite is led by the managers from Firm D and the composite is managed in a similar manner as was previously done at Firm D, Firm DJ would choose Firm D’s performance history as the surviving record and, if all the portability requirements are met, its composite historical performance must be linked to the on-going performance of DJ’s European Fixed Income Composite.

If the investment management philosophy of the new composite represents a blending of the two previous management styles, there is not a surviving composite. The new European Fixed Income Composite would not have any performance history; however, the track records of the composites at both Firm D and Firm J can and should be shown to prospective clients as supplemental information and, if not shown, should be made available upon request.

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