| ACA webcast attendee |
| | 04/22/08 at 03:55 PM | Reply with quote | #1 |
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How do GIPS Compliance Investment Advisors treat Alternative Funds? Are they included in the composite? |
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| ACA |
| | 04/23/08 at 11:18 AM | Reply with quote | #2 |
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The GIPS Standards reccomend that firms consider the following when defining their firm:
- how the firm is held out to the public
- firms are encouraged to adopt the broadest and most meaningful definition of the firm
- fair representation should always be considered
This being said, we have seen firm definitions go both ways. On one hand, a firm may choose to present the broadest definition of the firm that includes both traditional assets as well as the firm's hedge fund business. This also results in a higher AUM being presented on a GIPS compliant report.
On the other hand, some firms have various divisions that are so segregated that it makes more sense to have multiple "GIPS firms" under one larger umbrella. For instance, XYZ Asset Management may have a retail division, an institutional asset management division, and an alternative division. If these divisions function and are held out to the public as seperate entities, the case could certianly be made to define each as a seperate firm for GIPS purposes. Also keep in mind that if you choose this route, you may choose to claim compliance on the institutional asset management division, but not on the alternatives division.
If alternative assets, such as hedge funds, are included in the definition of the firm, then they must be included in composites to the extent they are considered discretionary and fee paying. Most firms tend to have each hedge fund they manage included in a seperate composite; thus, the track record of the fund is that of the composite.
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