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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CurrentEffective: 1 June, 2009Categories: Securities LendingSource: GIPS Executive Committee
We manage certain portfolios, including pooled vehicles, that may participate in securities lending. We have recognized income related to securities lending in the portfolio performance. Due to bankruptcies and other market events, we did not receive back securities that had been loaned and instead received the pledged collateral. The value of the collateral received is less than the value of the securities loaned, resulting in a negative impact to performance. Can we exclude this negative impact from the portfolio’s return calculation? Alternatively, can we exclude the portfolio from the composite?
The firm cannot exclude the impact of the securities lending collateral shortfall if it had previously determined that it would include the income associated with securities lending. Firms must not exclude the portfolio from the respective composite due to the loss on securities lending collateral.