CFAI text Vol 6, P.306 Can anyone advise tangibly (example, if any) what is a Carve-Out Segment ?
I think u can just know that it needs to have its own cash position to be considered a separate composite. If you manage a balanced fund, you are not allowed to carve out the equity performance of that balanced fun and claim it as a separate equity composite. It must be a composite with it’s own cash position.
Consider a balanced fund that is 45% Equity, 45% Fixed Income, and 10% Cash. GIPS doesn’t allow the firm to “Carve-out” the 45% Equity segment and toss it in an equity composite. That is, unless the equity section is managed separately with its own cash balance. The key phrase being “Separately Managed”.
alta168 Wrote: ------------------------------------------------------- > CFAI text Vol 6, P.306 > > Can anyone advise tangibly (example, if any) what > is a Carve-Out Segment ? The CFA text explains it very well. However a quick google search on carve out gives a 2008 pdf document which states: A carve-out is defined as a single or multiple asset class segment of a multiple asset class portfolio. It is used to create a track record for a narrower mandate from a portfolio managed to a broader mandate. For example, the Asian securities from a Euro-Pacific portfolio or the equity portion of a balanced portfolio could be considered a carve-out. Carve-outs are generally based on asset class, geographic region, or industry sector. The carve-out must have its own cash. Possible methods for properly accounting for the cash positions include: 1. Separate portfolios: cash and securities are actually segregated into a separate portfolio at the custodian. 2. Multiple cash accounts: each segment’s cash is accounted for separately (e.g., equity cash account, fixed-income cash account, etc.). 3. Sub-portfolios: each segment of a portfolio is accounted for as if it were a separate portfolio. Disclaimer: These are excerpts from the document.
Very helpful, thanks!
team_alex Wrote: ------------------------------------------------------- > Consider a balanced fund that is 45% Equity, 45% > Fixed Income, and 10% Cash. > > GIPS doesn’t allow the firm to “Carve-out” the 45% > Equity segment and toss it in an equity composite. > That is, unless the equity section is managed > separately with its own cash balance. > > The key phrase being “Separately Managed”. Also equally it must have its own cash balance