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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Current

Effective: 1 July, 2021

Categories: Composite Construction, Discretion

Source: GIPS Standards Technical Committee

Some of our segregated accounts have client-restricted securities (e.g., low-cost basis stocks, held-to-maturity securities), and these assets are considered “unmanaged.” May we classify the restricted portion of the portfolio as non-discretionary and keep the remaining discretionary portion of the portfolio in the composite?

A firm may choose to classify the restricted portion of the portfolio as non-discretionary and keep the remaining discretionary portion of the portfolio in the composite, provided the remaining portion is representative of the composite’s strategy. When determining if the remaining portion of the portfolio should be included in the composite, firms should consider if the assets in the non-discretionary portion of the portfolio affect the management of the portfolio’s investment strategy. Firms must also take care when calculating returns for the discretionary portion of the portfolio. For example, dividends on non-discretionary assets must not be recognized as income for the discretionary portion of the portfolio that is included in the composite. All calculation and composite construction requirements apply to the remaining discretionary portion of the portfolio.

Q & A Database

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