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 September, 2001 - 31 December, 2013

Categories: Benchmarks

Source: Investment Performance Council (IPC)

If you are using a custom benchmark that includes fewer countries or regions than the investment universe of the composite, you might face the troublesome task of reporting percentages of the composite invested abroad. How do we solve that problem with respect to the GIPS standards? Would it be acceptable to interpret regions as a group of countries – for example, Europe – and stick to reporting the percentage of the composite invested in regions not included in the benchmark?

The GIPS standards state that, for composites measured against specific benchmarks, the firm must disclose the percentage of the composites invested in countries or regions not included in the benchmark. If the firm created a custom benchmark to manage portfolios in a composite, it is not clear why the firm created a benchmark that does not include the countries and regions that are represented in the composite. The Standards, however, leave it up to the firm to define the term “regions” in this disclosure. Once the regions are defined, the firm should disclose how they are defined and provide the percentage of the composite that is not represented in the benchmark regions.

This disclosure is not required to be made for all periods. The firm could make one disclosure to indicate the non-benchmark assets. One example of this disclosure might be ‘Up to 40% of the portfolio may, at the manager’s discretion, be invested in assets outside of the benchmark.’ If possible, the disclosure should state the types and levels of risk of the non-benchmark instruments to provide the best insight into the nature of the portfolios in the composite.