Rd48 (GIPS). Carve-outs post 10Jan2010

I’m working through the CFAI texts currently. Carve-outs allocations to composites appears on pages 302-304. The text says that from 10Jan2010 you can’t include, say, an equity asset carve-outs in an equity composite unless it is separately managed with its own separate cash allocation. Okay, but what happens if this is not the case? How should you treat mult-asset funds? Do GIPS really want multi-asset funds to be thrown together in a miss-mash composite? If either the independent management/cash allocation requirements is breached isn’t this the implication? For example, the multi-asset composite would include funds that benchmarked 20%/80% equities/bonds with funds that benchmarked 80/20% equities/bonds. Clearly not very informative to users of composites. And wouldn’t such a composite itself breach GIPS as it is incoherent? Can anyone help clear this up?

>Okay, but what happens if this is not the case? In this case, you are not allowed to include the carveout in the equity. > How should you treat mult-asset funds? The same way, you should treat multi-asset funds, as well as all funds. As per my understanding: Just that you can include the carveout portion into the equity, does not mean that you don’t have to include the whole portfolio in one of the composites. I.e., you HAVE to find the appropriate way to categorize your composites so that you can include ALL of your portfolios (independent whether you can include carveouts to some other composites). Finding the right categorization of composites is one of the most difficult parts of GIPS compliance. One should use the suggested hierarchy: Investmnt mandate then asset classes then style or strategy then benchmarks then risk/return characteristics. to find the right defintion. p304 shows an example of definition where you divide the multi asset portfolios into 3 composites: 50/50 fixed income vs. equities, 65/35 and 20/80

thanks elcfa