(Extract from 2013 CFA AM Q11) - Lux seeks long-term growth of capital by investing in a diversified portfolio of equities across the Scandinavian region. - Lux uses a broad Scandinavian equity market index as its benchmark.
My Question: D** oes t **he 2013 AM exam example Lux not meet the GIPS benchmark standard because it should use growth style index? Thanks.
If the composite has certain style, say value or growth, it must can’t use broad market index as benchmark from meeting GIPS requirement purpose.
Note: GIPS Provision IV.B.2.c.iii states, in part, “Verifiers must…determine that: The portfolio’s investment mandate, objective, or strategy, as indicated by the portfolio’s investment management agreement, investment guidelines, portfolio summary, and/or other appropriate documentation, is consistent with the composite definition.”
Not sure where your questions are directed, and why you are trying to bring in GIPS into an AM question - as though you do not have enough matter to be tested in the AM, as it is.
My question: If the composite has certain style, say value or growth, it must can’t use broad market index as benchmark from meeting GIPS requirement purpose. Is this statement correct? Thanks.
This is called being GIPSinoid. No treatment for it yet. Effects range from confusion, euphoria, to suicidal thoughts ( unconfirmed story of a candidate who swallowed 200 BA-II Professional batteries ) . Rumor has it that Lindsey Lohan, Kanye West, Dennis Rodman, Paris Hilton, Chris Brown, Justin Bieber, and Donald Trump had read GIPS back in the days.
I don’t think “long-term growth of capital” implies a growth strategy versus value. I think the focus is investing more in equities for long-term growth versus fixed-income.