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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ArchivedEffective: 1 January, 2006 - 30 November, 2013Categories: Wrap Fee PortfoliosSource: Guidance Statement for Wrap Fee/SMA Portfolios
Our firm manages both institutional and SMA portfolios. As of 1 January 2000, we began to claim compliance with the GIPS standards for our institutional portfolios. Given the guidance provided for wrap fee/SMA portfolios, we do not believe we can currently meet the requirements of the GIPS standards for our wrap fee/SMA portfolios. Can we continue to exclude our wrap fee/SMA portfolios from our GIPS-compliant firm, so we may continue to claim compliance for our institutional portfolios?
The answer depends on how the firm holds itself out to the public. For purposes of claiming compliance, the GIPS standards define a firm as an investment firm, subsidiary or division held out to the public (clients or potential clients) as a distinct business entity. This entity is a unit, division, department, or office that is organizationally and functionally segregated from other units, divisions, departments, or offices and retains discretion over the assets it manages and should have autonomy over the investment decision-making process. Possible criteria that can be used to determine this include:
- Being a legal entity,
- Having a distinct market or client type (e.g., institutional, retail, private client, etc.),
- Using a separate and distinct investment process
In the situation described, provided the non-wrap fee/SMA division satisfies the definition of the firm guidance above, it is possible for the organization to separately define its institutional division as a distinct business entity that excludes its wrap fee/SMA division from its claim of compliance. This would not automatically jeopardize the organization’s claim of compliance with the GIPS standards. If the non-wrap/SMA (institutional) portfolio managers also manage the wrap fee/SMA portfolios, this structure would not necessarily prevent the firms from being separately defined. The firm should consider that it may not show performance from the wrap fee/SMA division (except as supplemental information to its institutional track record). For more information on supplemental information, please review the Guidance Statement on the Use of Supplemental Information.
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