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 - 30 November, 2013

Categories: Composite Construction

Source: GIPS Handbook, 2nd Edition

We have a client whose assets are divided between several portfolios. The client wants to maintain the portfolios separately. Do we consider each portfolio for this one client as separate portfolios or do we combine the separate portfolios into a single composite?

One of the fundamental concepts of the Standards is the creation of composites based on the strategies implemented by the firm. The Standards require that firm composites must be defined according to similar investment objectives and/or strategies. The firm must determine how to construct its composites such that the composites represent the firm’s investment strategies and present performance fairly and accurately.

If the portfolios described are all managed with the same investment strategy, then placing them in one composite may be acceptable within the requirements of the Standards. The firm must determine whether or not including the portfolios together in a composite will present performance accurately and fairly and what would be meaningful and representative.

It should be noted that if the relationship is managed as one strategy, then the firm should combine the “sub-portfolios” into one “master” portfolio for the appropriate composite such that composite calculations, such as composite minimum, number of portfolios and dispersion, are calculated using the “master” portfolio. If the accounts are not managed as one strategy, they would be considered individual portfolios and would each be placed in the appropriate composites. All composite calculations, such as composite minimum, dispersion, etc. would be calculated using the individual portfolio.

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