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 that participate in securities lending, but securities lending is not part of the strategy. The securities lending arrangement is between our client and the client’s custodian. We do not recognize income related to securities lending in the portfolio’s performance. Due to bankruptcies and other market events, the portfolio did not receive back the 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?
Yes, in cases where the securities lending decision was made by the client, securities lending is not part of the intended strategy, and the firm has not included securities lending income in the performance of the portfolio, any impact caused by the securities lending transactions, including a shortfall in related pledged collateral, may be excluded from the performance of the portfolio.