GIPS requires that all firms claiming compliance as of 2010 calculate returns for all periods marked by “large external cash flows”; however, they leave the definition of “large external cash flows” up to the firm. On a client account, (not composite) level, is 10% of the beginning market value an acceptable trigger for defining a return period? Of should I go lower (5%)?
According to Level 3 material, 10% is the trigger. The rule applies to individual portfolios returns and not on composite calculations.