“The GIPS standards distinguish between large and significant cash flows. “Large” denotes the level at which the firm determines that an external cash flow may distort performance if the portfolio is not valued. “Significant” describes the level at which the firm determines that a client-directed external cash flow may temporarily prevent the firm from implementing the composite strategy.” (Institute 285) Institute, CFA. Level III 2013 Volume 6 Portfolio: Execution, Evaluation and Attribution, and Global Investment Performance Standards. John Wiley & Sons (P&T), 6/18/2012. vbk:9781937537388#page(285). What does that mean? My guess is, “significant” is bigger than “large” because it affects the whole composite whereas “large” only affects one portfolio.
I think one is saying “absolute” and the other is saying “relative”
I don’t think one is necessary greater than the other.
The two are quite different things .
Large cash flow doesn’t necessarily impact performance , definitely impacts performance measurement and reporting over a time period.
Significant cash flows impacts performance either by creating cash drag , or by inducing rapid sale of securities ( most likely enough speed to cause losses ). It may or may not impact performance reporting , but that is incidental to the real loss suffered by investors