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 October, 2012 - 31 December, 2019

Categories: Alternative Investments

Source: Guidance Statement on Alternative Investment Strategies and Structures

Our fund of hedge funds (Fund A) is invested in underlying funds (Fund B and Fund C), which are also part of the firm for purposes of compliance with the GIPS standards. In addition, the hedge funds (Fund A) and Fund C are invested in the same strategy and should belong in the same composite. How should we handle such cases for the purpose of calculating total firm assets and composite assets?
The GIPS standards do not permit double-counting for the purpose of presenting total firm and/or composite assets. If double-counting is not eliminated, this will “inflate” the composite assets and total firm assets and result in a misstated compliant presentation.

In the case of master-feeder structures with cross-fund investments, elimination of the double-counting of assets at the composite level and firm assets level is required.

For example:
- The GIPS firm includes three funds: A(€400m), B (€300m), and C (€200m).
- Fund A is invested in Fund B with €200m and in Fund C with €100m.
- Fund A and Fund C are included in the same composite: X.
Total firm assets will be calculated as €400m + €300m + €200m – €200m – €100m = €600m

The composite assets for composite X will be calculated as €400m + €200m -€ 100m = €500m.