If a portfolio is newly introduced in the middle of the reporting period, (A) Should the portfolio return (half year, not projected) be calculated? (B) Should the portfolio return contribute to the composite return? How? There is no beginning-of-period market value of the portfolio, since it was not existing that time. - sticky
You should add the new portfolio to the composite on a timely basis. So you would include it in the 1st available reporting period. For example, if the portfolio was created June 20th, I believe you would start including it in the composite on July 1st which would correspond to the beginning of the 3rd quarter of that year.
but you cannot include it in the yearly return, right?
it would be included in the annual return, but only contributing to those returns for the time it was in the composite for the year.
Right, it just says you can’t Annualiz (holy crap I cant figure out how to spell that) the data
PJStyles Wrote: ------------------------------------------------------- > You should add the new portfolio to the composite > on a timely basis. So you would include it in the > 1st available reporting period. For example, if > the portfolio was created June 20th, I believe you > would start including it in the composite on July > 1st which would correspond to the beginning of the > 3rd quarter of that year. Composite A has: port 1 starting Jan1 @$10 port 2 starting Jul 1 @$10 Now if you have annual return of p1 = 5% and half-year total return of p2 (not annualized) = 2% What is the annual return of the composite? Let’s say we use beginning-of-period method, no CF adj. - sticky
Sticky, its the Composite Return that’s Annualized not the Individual portfolios. So assuming there is more than 1 portfolio in the composite the new portfolio will contribute X% to the total composite based on its Beginning of the Period Mkt Value, so say July 1st. Now if its the ONLY portfolio in a New composite then you are right and you wouldn’t annualize it. Also, by annualizing before I’m refering to 1Y, 3Y, 5Y, 10Y periods. You CANNOT annualized a Daily, Monthly, Quarterly, Semiannual return. You need at least 12 months of data to annualize. For Instance if the portfolio was added to an existing compoiste on July 1st, on July 31st you could show say a 1Y annualized return but that return will be from August 31st, 2006 say to July 31st, 2007.
Man… I’m going to spend some serious time next week on GIPS… Hate this stuff and what makes this section horrible is that at most you’ll get 1 vignette on it or it’ll be tied into the Ethics section Vignette. From what I heard, last year they only had like a 3 or 4 mark question on it.