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 September, 2012 - 31 December, 2019

Categories: Portability

Source: GIPS Executive Committee

My firm, which is compliant with the GIPS standards, has just completed a lift out of a growth team from another firm that also claims compliance with the GIPS standards. Substantially all of the investment decision makers from the prior firm are now part of our firm, and the decision-making process has remained intact and independent. While at their prior firm, the growth team was responsible for two composites. The track record of one composite consisted entirely of one mutual fund. The track record of the second composite included one mutual fund and six client portfolios. This was an unfriendly lift out, and we do not have any records for the six client portfolios. While the growth team’s management of the two mutual funds ended when the lift out occurred, we can meet the records requirement with information from Morningstar® Financial, as well as regulatory filings. Since mutual funds have a public track record, can we simply rely on the performance of the mutual funds included in each composite to provide the necessary documentation and support for the performance of the two composites, thereby meeting the records requirement for portability?

Firms must have the records to support portfolio-level returns for each portfolio in a composite. In many cases, the performance of a mutual fund is publicly available and is calculated according to a specific required methodology. If the firm is able to obtain the mutual fund performance information from a publicly available source, such data may be used to satisfy the GIPS recordkeeping requirements for the fund itself. However, regardless of the public nature of a mutual fund’s track record, having the records for a mutual fund does not relieve the firm from the requirement to have the records for every other portfolio in the composite as well. Since the track record of one composite consisted entirely of one mutual fund, having the records for the fund could meet the records requirement for portability. However, in the second case, the records requirement can only be met by having the appropriate records for all seven portfolios in the composite. If the mutual fund is the only portfolio for which the firm has documentation, the records requirement is not met for that composite. While the track record of the mutual fund may not be linked to the performance of the growth team at their new employer, it may be presented as supplemental information. Firms must adhere to all applicable local laws and regulations.