CFA Practice Question
Which of the following is not a correct statement concerning the creation and maintenance of composites under GIPS?
A. All actual fee-paying discretionary portfolios must be included in at least one composite.
B. Performance of the composite must be stated after investment management fees have been deducted.
C. Asset-only returns must not be mixed with asset-plus-cash returns.
Explanation: Performance can be quoted before or after management fees, as long as the method is disclosed.
User Contributed Comments 7
| User | Comment |
|---|---|
| jmcarr02 | So take all the management fees you want... |
| megw | I thought cash was an asset class |
| wollogo | Compare apples with apples, shouldn't be grouping together asset-only and asset+cash returns. |
| sbajaj | Performance must also be presented net of trading costs. |
| mekc | why must all portfolios be included in at least one composite... where does it say that? |
| alester83 | the GIPS standards require firm wide compliance, so they would need to be in a composite |
| ascruggs92 | Not all accounts, all accounts that are fee-paying and discretionary. GIPS definition of discretion is different than the legal definition, allowing a manager to define account as non-discretionary if there are significant client directed investment restrictions, even if the account pays fees |