Internal Dispersion GIPS

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Magix

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Just a little confused on whether the internal dispersion is the dispersion of individual asset (within portfolios) returns around the average composite return or the dispersion of average portfolio returns around the average composite return.
Thanks.
 
i think it is the despersion of the portfolios w/ in the composite.
 
that’s the way I read it.
(would be good to have someone who actually uses GIPS. I have never met, seen or heard of a fund which claims to use GIPS).
If we get a question on any of the 467 different date combinations - I’m stuffed
 
actually think about it.
it must be the dispersion of the actual portfolios. b/c if there a only 5 portfolios in the composite yoiu dont have to report it.
thus it would not make sense if it were assets in the portolios themselves
 
I just went over that again. The internal dispersion is the dispersion of the portfolio returns around the composite return (as nikko0355 states above). The external dispersion is measured as the dispersion of diffrent composite returns - around the average of ALL composite returns. Thanks guys!
 
You will probably not see a retail mutual fund (assuming that’s what you refer to as a fund) claiming GIPS-compliance b/c mutual funds are regulated heavily in their own right. In Europe, for example, it’s UCITS III. It’s basically a mix of GIPS and some Asset Manager Code of Conduct provisions…to protect the average Joe from around the corner.
GIPS, on the other hand, is heavily used in the institutional management business. That’s why so much emphasis is put on composites, which - as opposed to mutual funds - are not heavily regulated and do not have disclosure requirements. I mean, a manager could tell you everything he wants (by the way, that’s why you do all this due diligence). That’s the whole point of GIPS…to “protect” institutional investors that according to legislation are supposed to be professional enough to make investment decisions without strict regulation. But many would agree that that’s overestimating the know-how of a lot of institutional investors.
Hedge funds are a good example…there has been so much “deception” in this industry (no offense to the kosher guys) that lawmakers are thinking about regulating it tightly now. I guess if GIPS provisions would be mandatory for all hedge funds, one or the other could have saved a lot of money =)
 
Dispersion of the composite itself is recommended, not required. Portfolio dispersion about the composite is required.
 
When you report the return for the composite it is the asset weighted average of all the underlying portfolios.
The dispersion measures the variance of individual portfolio returns around the mean composite return (the return that is reported).
 
thanks to nikko, mwvt, magix, hk and phillybanker. I have a chance to learn GIPS because of you.
 
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