CFA Practice Question

There are 361 practice questions for this study session.

CFA Practice Question

All of the following are required by the GIPS for composite construction except for ______.
A. portfolios terminated two periods ago
B. actual assets under management
C. new portfolios
Explanation: Terminated portfolios must be included in the historical record of the appropriate composites up to the last full measurement period that the portfolio was under management.

User Contributed Comments 13

User Comment
devendra It is required that firms composites must include actual assets under management, assets weighting are done by size. equal weighted composites are also recommended to be disclosed & all actual fee paying portfolio's must be included in atleast one composite. One NEED NOT disclose the performance of the historical performance of the portfolio's no longer managed.
almond what exactly does a composite mean?
turtle check related subject - it's a bit not a'propos
pjudin This question is a part of part 3 - Composite Construction, which need NOT to be studied for the exam...post if its mentioned anywhere else
wollogo I guess the interpreation is that terminated portfolios are not relevant for the "construction" of a new composite. However they must be included in the historical performance of the composite if they match the composite criteria.

A simple example - Lets say I only managed portfolios with domestic equities but in the past had managed a potfolio that included foreign equities. If I was seeking GIPS compliance today I would create a composite of domestic equities and exclude the terminated foreign portfolio. However had the terminated portfolio been domestic equities then I would need to include this in the historical perfromance of my composite.

Do people agree with my interpreation? Or would I have to create 2 composites, one domestic and one foreign even though the foreign portfolio was terminated prior to claiming compliance.

jpducros I think you cannot create composite a posteriori; otherwise you may be subjective to portfolio's performance....
CFunder pg. 146 of the CFAI text - in the optional segment.
alester83 almond, a composite groups the performance of a set of clients for some specified period of time. it allows investors to see the managers track record
bergje11 Doesnt this violate survivorship bias?
dbedford What if the only prior accounts that closed were not happy with performance and the only ones with you are good performance. I as an investor would like to know what your composite looks like with good and bad performance
sevywonder Brutal question. This would be worded better in the Institute's materials
spmadoff GIPS 0.A.10. [relevant excerpt] Firms must include terminated composites on the firm’s list of composite descriptions for at least five years after the composite termination date.
jstid40 Is A. wrong because one only has to include the latest year of results of a terminated portfolio?
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