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 March, 2006 - 31 December, 2019

Categories: Composite Changes

Source: GIPS Handbook, 2nd Edition

For the past five years, Firm C has maintained a global equity composite. Although the firm defined the strategy to allow investments in equity securities from any geographic area, the firm tactically did not hold any Japanese equities during that time. Now, Firm C wants to redefine the composite as global equities ex-Japan. Is this possible under the GIPS standards?

Historically, Firm C did not actually manage the assets in the global ex-Japan style. Instead it made a tactical decision not to own Japanese equity securities. It had a broadly defined investment management style for the original composite that could have included Japanese equity securities. By redefining the strategy of the composite more narrowly, the new ex-Japan composite would not accurately reflect the investment strategy of the composite historically. Redefining composites in this way does not provide an accurate history of the mandate and would not be appropriate. Firm C is accountable for the tactical decision not to own any Japanese securities. Typically, Firm C would need to have documented changes in client guidelines in order to make such a change to the strategy of the portfolios in the composite.