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ArchivedEffective: 1 September, 2001 - 31 October, 2012Categories: PortabilitySource: Investment Performance Council (IPC)
The Guidance Statement on Performance Record Portability states:
When a manager, group of managers, or an entire firm joins a new firm, a composite’s past performance may be linked with the ongoing results of the new firm only if all of the following conditions are true for that composite:
Substantially all the investment decision makers are employed by the new firm (i.e., research department, portfolio managers, and other relevant staff),
The staff and decision-making process remain intact and independent within the new firm,
The new firm discloses that the performance results from the old firm are linked to the performance record of the new firm, and
The new firm has records that document and support the reported performance.
In addition to the above four rules, when one firm (Firm A) joins an existing firm (Firm B), performance from one of Firm A’s composites can be linked to the ongoing results of Firm B only if:
Substantially all the assets from Firm A’s composite transfer over to Firm B.
Where it says “only if all of the following conditions are true for that composite”, what does “composite” refer to in this instance? Can a firm create the composite history based on the portfolios that transfer to the new firm if the history is representative of the old composite?
The concept of portability revolves around the ability to bring a track record from one firm to another. It would not be representative to recreate a record with only selected portfolios. The word “composite”, as noted above, refers to the entire composite from the old firm. In addition to meeting all the elements of the Guidance Statement, in order for a firm to be able to link the composite from the old firm to the on-going performance of the new firm, the entire composite performance history, including all portfolios, must be used. The firm must have all the records needed to substantiate that performance history.
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