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? |