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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  • Current

    Effective: 1 July, 2021
    Categories: Disclosures, Pooled Funds
    Source: GIPS Standards Technical Committee

    Our firm manages several of our own mutual funds that we classify as broad distribution pooled funds (BDPFs). We include these BDPFs in composites along with segregated accounts, and we prepare GIPS Composite Reports that include time-weighted returns. Provision 4.C.11 requires disclosure of the current fee schedule appropriate to prospective clients and prospective investors. Are we required to include the fee schedule of BDPFs included in composites in GIPS Composite Reports?

    The determination of which fee schedule must be included in the GIPS Composite Report depends on the type of prospect the firm is marketing to, and not the type of portfolios that are included in the composite.

    The GIPS standards include two types of prospects: prospective clients and prospective investors. A prospective client is any person or entity that has expressed interest in one of the firm’s composite strategies and qualifies to invest in the composite. This definition is different from that of a prospective investor, which is any person or entity that has expressed interest in one of the firm’s pooled funds and qualifies to invest in the pooled fund.

    If a GIPS Composite Report is being provided to a prospective client, the firm must include the current fee schedule that is appropriate for the prospective client. The firm is not required to include the fee schedule for any pooled fund included in the composite.

    If the firm provides a GIPS Composite Report to a prospective investor for a pooled fund that is included in the composite, the firm must disclose the current fee schedule that is appropriate for the pooled fund prospective investor. It must also include the current expense ratio for the pooled fund.

    Firms are not required to provide a GIPS Report to prospective investors for BDPFs. However, If a firm decides that it wishes to provide a GIPS Report to a prospective investor for a BDPF, however, and it provides the GIPS Composite Report that includes the specific BDPF, the GIPS Composite Report must include the current fee schedule for the BDPF. It must also include the current expense ratio for the BDPF.