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.
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CurrentEffective: 1 July, 2021Categories: Calculation Methodology, ValuationSource: GIPS Standards Technical Committee
If a portfolio contains investments that suddenly become illiquid, how should they be valued, and how should portfolio performance be calculated?
If a portfolio contains investments that suddenly become illiquid, the investments must be valued at fair value, with any resulting gains or losses reflected in performance. Firms must not claim that illiquid investments are non-discretionary simply because of their illiquidity in order to exclude them from the portfolio or the composite. If an illiquid investment or any other investment ceases to be managed in a discretionary manner (e.g., because of a change in the client agreement), its performance impact must be reflected in the portfolio’s performance until the date of such a change. See Provision 2.B.6 of the GIPS standards for the recommended fair value hierarchy.