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 November, 2021Categories: Carve-OutsSource: GIPS Standards Technical Committee
Is there a specific methodology we must use when synthetically allocating cash and any related income to a carve-out?
The GIPS standards do not require a specific calculation methodology for synthetically allocating cash and any related income to carve-outs. The firm must develop a calculation methodology that generates performance that is not misleading, presents performance fairly, and is applied consistently. The firm must document policies and procedures for how cash is allocated to carve-outs on a composite-specific basis.
Examples of some acceptable methodologies that may be used to allocate cash synthetically to a carve-out are included on the Tools page of the GIPS standards website under the Firms section. There is a spreadsheet named Carve out TWR Calculations that includes methodologies when time-weighted returns are used, and a spreadsheet named Carve out MWR Calculations that includes methodologies when money-weighted returns are used.