Friday, September 24, 2010

When's a composite not a GIPS composite?

When it's an "administrative composite."

I just commented on a response to someone who commented on yesterday's post, regarding "catch-all" composites. Many firms utilize "administrative" composites to keep track of accounts that aren't in GIPS(R) (Global Investment Performance Standards) composites. For example:
  • accounts below the firm's minimum
  • non-discretionary (for GIPS purposes) accounts
  • accounts transitioning from one composite to another
  • accounts that haven't yet been added to a composite
  • accounts that have terminated.
Administrative composites can be helpful tools to manage your compliance. However, these composites aren't considered "GIPS composites," meaning that you
  • don't prepare presentations for them
  • have them listed in your "list of composites."
Admin composites aren't required, though they can be helpful. 

p.s., if an account that should be in a GIPS composite isn't, but is in an Admin composite instead, the requirement that it be in a composite won't be fulfilled.

p.p.s., "catch-all" composites aren't permitted. However, if the firm uses these to bring together all those accounts which are non-discretionary, that's fine.

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