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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Archived

Effective: 1 March, 2006 - 31 December, 2019

Categories: Composite Construction

Source: GIPS Handbook, 2nd Edition

Firm B manages several portfolios according to a particular strategy; however, the firm does not ever plan to market the strategy. Do these portfolios have to be included in a composite?

Yes. These portfolios must be included in a composite if the portfolios are actual, fee-paying, discretionary portfolios. It is important to remember that the GIPS standards do not differentiate between “marketed” and “non-marketed” composites.

The requirement for firms to include all actual, fee-paying, discretionary portfolios in at least one composite ensures that a firm presents a complete picture of its entire performance record. Without this requirement, there is a potential for firms to exclude poor performing portfolios from composites. Because the intent of the GIPS standards is to accurately and fairly represent firm performance, all actual, fee-paying, discretionary portfolios must be included in at least one of the firm’s composites. Firms must maintain a list of composite descriptions, which must include all composites, whether marketed or not, and must disclose that the list is available upon request.

If client-imposed restrictions on these portfolios do not allow the implementation of the firm’s strategy, the firm could either classify these portfolios (and all other portfolios with the same restriction) as non-discretionary or could choose to classify them as discretionary and create a composite for portfolios with the defined restrictions. Firms should, where possible and appropriate, consider classifying portfolios with defined restrictions as discretionary and grouping them with portfolios with similar restrictions in a composite.