I.e. back in 2008 they demanded to go to cash against my firms wishes, and missed all of the upswing of 2009, and is really impacting our composite. Are we allowed to remove this individual under GIPS?
Sounds to me like their demands mean that the account is no longer representative of the strategy, so it’s probably allowed, but I haven’t read my GIPS in a while, so I’d wait to see what others say on this. You would presumably need to create a new composite containing that client, because everyone needs to be in a composite. The question is whether other clients will be doing this too in the future. If clients refusing to do your strategy is a common occurrence, it would look like window dressing, which is clearly against GIPS’ purpose. if it is a one-time issue connected with the crisis, then it’s more defensible.
Are all of the assets non-discretionary? Can you distinguish between discretionary/non-discretionary and be GIPS compliance?
MissCleo Wrote: ------------------------------------------------------- > I.e. back in 2008 they demanded to go to cash > against my firms wishes, and missed all of the > upswing of 2009, and is really impacting our > composite. Are we allowed to remove this > individual under GIPS? Yes you can. All firms have (or should have) a policies and procedures document that outlines the practices for inclusion and removal of accounts from composites. In my firm for example, we remove accounts that deviate from the “model” by more than X percent at the end of the month in which the change occurred. In your case, the client directed an allocation decision against your firm’s composite strategy thereby making the account non-dicretionary, which allows you to remove it without conflicting with GIPS. Again check the policies and procedures doc because this varies from firm to firm but there is nothing in GIPS that prohibits removing an account from a composite. You would, of course, have to record an exit date and all performance prior to said date remains in the composite’s blotter history.