Wednesday, February 2, 2011
Two (or more) sets of books
I was intrigued by this question as it hadn't previously been posed, and I am unaware of anyone who does this.
There is absolutely nothing wrong with maintaining multiple sets of returns. But, I recommended that they don't do this as a matter of standard practice, but rather only when approached to justify their return or reconcile to one (or both) the other parties. Why do all this work when you don't know if it will be needed? Wait and then do the appropriate calculations and analysis.
There are many reasons for potential differences in returns, and the return formula is just one. Many asset managers are often charged with doing this sort of thing and perhaps if they know that a particular client religiously asks them to prove out their numbers, then in that case perhaps doing it on an ongoing basis makes sense, but otherwise, I'd do it ad hoc.