Quick GIPS Question

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Damil4real

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Non-fee-paying portfolios may be included in the firm’s composites, but if they
are, firms are required to disclose the percentage of composite assets represented
by non-fee-paying portfolios. If a portfolio’s status changes from discretionary to nondiscretionary, the portfolio
may not be removed from a composite retroactively. However, the portfolio must be
removed going forward.
Question:
Can a PM decide to leave a Non-fee-paying portfolio in the composite (going forward) if its status had changed from discretionary to nondiscretionary…, since a firm may include such portfolio in a composite?
 
I think for discretionary/nondiscretionary the rules are more black and white. If a PM does not have discretion over the portfolio, it should not be in the composite.
 
Zanalyst wrote:I think for discretionary/nondiscretionary the rules are more black and white. If a PM does not have discretion over the portfolio, it should not be in the composite.
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I believe it’s stronger than that; nondiscretionary portfolios must not be included in composites.
 
I thought non-discretionary portfolios can be included in composites, but you just have to disclose it.
No?
 
Got it!
CFA Book 5 - Page 297. Last paragraph.
“Provision I.3.A.1 goes on to state that non-fee-paying discretionary portfolios may be included in a composite (with appropriate disclosures)”.
I was incorretly referring to non-discretionary portfolios as opposed to non-fee paying discretionary portfolios.
My apologies and thanks for your help.
 
Damil4real wrote:Got it!
Click to expand...
Cool!
Damil4real wrote:CFA Book 5 - Page 297. Last paragraph.
“Provision I.3.A.1 goes on to state that non-fee-paying discretionary portfolios may be included in a composite (with appropriate disclosures)”.
I was incorretly referring to non-discretionary portfolios as opposed to non-fee paying discretionary portfolios.
My apologies and thanks for your help.
Click to expand...
My pleasure.
No apology necessary. Here’s the place where you’re allowed to make all the mistakes you want. Get them out of your system; then you won’t need to make any on exam day.
 
Ya, it MUST not be included. I use must/should interchangeably in everyday life, forgot their was a CFA distinction.
 
Non discretioanry portfolios to be excluded, PM does not have a control on it…it’s dictated by the client.So no retroact. correction required but going forward exclude it.
 
Non fee paying disctetionary can be included with disclosure but nion discretionary( investment manager does not have control over decisions made) CANNOT be included.
I think. LOL
 
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