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 December, 2009 - 31 December, 2019

Categories: Carve-Outs

Source: GIPS Executive Committee

Our firm has four composites that consist only of carve-outs with allocated cash from larger portfolios. We understand that effective 1 January 2010, carve-outs must not be included in composites unless they are actually managed separately with their own cash. For one particular composite, we plan to manage the portfolios separately with their own cash by manually administering the cash in accordance with the Guidance Statement on the Treatment of Carve-Outs. Given the nature of this labor intensive operation, we believe that we cannot apply the same method to all four composites, but just to one, beginning 1 January 2010. Can we do so?

Yes. The GIPS standards require that, for periods beginning on or after 1 January 2010, carve-outs must not be included in composites unless the carve-out is actually managed separately with its own cash balance. Therefore, any and all of the carve-outs with allocated cash must be removed beginning 1 January 2010. Firms must determine which of the segments of multiple-strategy portfolios are managed separately with their own cash balances to determine the universe of possible carve-outs. As a result, some composites may include carve-outs (managed separately with their own cash balance) after 1 January 2010 and some may not. If a firm creates a carve-out of a particular strategy, then all similar portfolio segments within the firm managed to that strategy and managed separately with their own cash balance must also be included in the composite.