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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ArchivedEffective: 1 March, 2006 - 31 October, 2012Categories: Composite ChangesSource: GIPS Handbook, 2nd Edition
We currently have two composites in the small cap growth universe. The guiding principles for managing the accounts are the same, but the market cap ranges differ on the low and high ends. One product runs approximately $100MM to $1.0B. The other product runs $500MM to $1.5B (with flexibility up to the largest stock in the Russell 2000 Growth Index).
We would like to expand, with client acceptance, the market cap range for all accounts in each product to encompass the full range, essentially eliminating the need for two products. How do we approach this from a composite standpoint?
When a firm decides to combine the investment strategies/objectives of two (or more) different composites, the firm would document the changes in client guidelines and create a new composite. The new composite will consist of all portfolios of the combined composites. The existing composites that the firm wishes to combine into this new composite would cease to continue. The new composite would not have historical performance results because the new composite’s strategy is newly implemented. The firm would maintain and have available the performance results of the previous composites.
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