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 January, 2006 - 30 November, 2013

Categories: Incubator Funds

Source: Guidance Statement on Composite Definition

We are starting an investment strategy but currently do not have any clients. As such, we would like to start the strategy with a proprietary portfolio. However, once we receive a client account managed in this strategy (which may happen up to 2-3 years later) we will close the proprietary portfolio.

Can we create a composite and continue to use the historical performance of the proprietary portfolio by simply adding any subsequent client accounts we receive to the composite? The composite would contain the historical performance of the proprietary portfolio but would continue on with only the new client portfolios, just as a normal composite would.

Yes, the situation you describe is appropriate. Performance of a proprietary portfolio (also known as a seed or incubator fund) may be included in a composite if the fund is composed of actual assets under management. As with any other terminated account, the performance history of the proprietary portfolio will remain in the composite up to the last full measurement period that the proprietary portfolio was under management. As other portfolios managed to the same strategy are added to the composite, the historical performance of the composite will continue to include the proprietary portfolio’s performance.

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