Could anyone give me some explaination about carve outs? what is the carve outs ? what is the purpose of GIPS to allocate cash to carve-outs? thanks
Say your firm runs a mutual fund that holds 40% large cap, 40% small cap, and 20% cash. You want the large / small cap pieces to be included in your large/small cap composites, so you decide to ‘carve out’ the returns those pieces earn and include them. In doing so you can’t simply include those returns and not include the cash (which presumably has very little return) so, until 2010, you have to include the cash as well by say including half of the cash in each of the large & small cap composites.
I thought there was two ways to allocate cash? Can the other way only be used after 2010?
I’m not sure about another way of allocating cash, I am sure that carve-outs are not permitted starting 1/1/10 unless the carve-out is managed separately with it’s own cash balance.
until 2010 you use either beginning or strategic allocation for cash. after 2010, bankin’ said it.
mwvt9 Wrote: ------------------------------------------------------- > I thought there was two ways to allocate cash? > > Can the other way only be used after 2010? yes there is this beginning of period allocation and strategic allocation method to allocate cash. Neither can be used after 2010. After 2010 the carve-out needs to be managed separately and should have its own cash allocation.
So in Bankin’s example above 40/40/20, you cannot include the small cap allocation to a small cap composite starting 1/1/10, because the small cap allocation is not managed separately. Correct?
very helpful explanations!