Does gips require benchmark dispersions?

As far as I know, it doesn’t but I read in some thread that it requires benchmark dispersion.

can someone confirm?


I think:

Measure of internal dispersion: nope.

Measure of external dispersion: yes.

can’t find it… even external dispersion…

Internal dispersion measures the variability in performance for all of the portfolios in a composite. In this context internal dispersion for a benchmark doesn’t exist. Std dev measures the dispersion of the overall return stream while internal dispersion measures the dispersion amongst portfolio returns in the composite.

A large internal dispersion would be a bad sign and indicate that the investment process is not consisent across the portoflios within the composite.


5.a.2. must include std dev of 3 yr for benchmark and composite if after 2011

Benchmark wouldn’t have a dispersion…because it’s the benchmark…1 index…the entire point of internal disperions are of the MULTIPLE portfolios in one composite…


From CFAI:

Acceptable measures of internal dispersion include , but are not limited to, high low, range and standard deviation.

This is a nuance, but pretty confident that *any* measure of internal dispersion is allowed (for some reason). Hate that they worded it as if there are measures that are unacceptable.

Correct if wrong please.

People aren’t answering your question properly. They’re just asking/answering new questions.

You need a measure of dispersion for the composite, but NOT THE BENCHMARK.

You need 3Yr Standard Deviationfor BOTH the composite and benchmark.

Measure of Dispersion is NOT the same as 3Yr Standard Deviation,

A benchmark doesn’t have dispersion, it has a standard deviation, and since 2011 (or 2010? who cares?) you must show the 3 year ex post standard deviation fo the benchmark for each year.

thanks cubemonkey and carni got it… what exectly is dispersion?

Dispersion is the fact that you might have 20 different accounts all doing the same strategy, but because of slight differences in their holdings, they all perform slightly differently over the year. For performance reporting under GIPS, you asset weight (using beginning of period weights) and give the asset weighted average.

But that’s not entirely fair, because there will be some clients who will have performed worse (and some better) than the overall number. Showing dispersion lets prospective clients know how variable your strategy is for individual portfolios over the year.

A simple dispersion measure would be the range. So if one account (the best) returns 20%, and another (the worst) returns 13%, the range is 7%.

Got it… Thanks carni…

Thank you all for contributing.