GIPS - portability of past performance

CFA Level III Portfolio Management
#1

Hi all, help with this question please:

Reading 33 Question 31 Page 298.

[question removed by moderator]

I thought the whole portability of past performance only applies when one firm acquires another, no? So does this mean when a Portfolio Manager jumps from one firm (ex. Pimco), to another (ex. Janus), the historical performance would be transfered to the new firm’s composite?

#2

Sorry to use the old post but this is exactly the same question I have.

Based on Kaplan, the past performance can be portable if the firm is acquired and certain conditions are met. If so, firm U cannot use the old composite.

However, based on the CFA context, the past performance can be portable if the firm is acquired or the new firm meet the conditions directly.

I guess we need to use CFA method again this time. Any thoughts?

#3

Go with what text says. CFAI text that is.

#4

Kaplan also uses the phrase “new or acquiring firm”. There is no discrepancy regarding this between CFA and Kaplan text.

However Kaplan Schweser in its first condition states this:

1. Substantially all the investment decision makers are employed by the new firm (e.g., research department, portfolio managers, and other relevant staff);

Now there is nothing in the original question to suggest that Firm U acquired Firm T’s research department and trading staff. So I want to understand how is the performance portable? I know the question mentions that Manger D takes all of the investment decisions but it’s also mentioned that he is supported by the research and trading staff. So I’m assuming that in order for Manager D to take his investment decision, the research dept. and trading staff are highly important to his cause. Without them his investment decisions may not have been correct.

So if the research dept and trading staff are not acquired by Firm U, shouldn’t the performance of Manager D not be portable?

#5

Thanks! Kaplan states “the record is not portable, but if a past firm or affiliation is acquired and if three other conditions are met, the past record must be linked to and used by the new or acquiring firm.” I dont think CFA text lists acquisition as a condition like Kaplan does. Maybe it is just the language piece I don’t understand…

Also, I think you raised a good question. Hope someone can clarify.

#6

At the end of the sentence Kaplan states, “…and used by the new or acquiring firm”. Although I get your point that they have focused on the acquisition as a condition but I don’t think that’s what they intend solely. For exam situation, acquisition is not the only criteria. A new firm that fulfills the 3 conditions can also use past record of the manager.

#7

Good to know! Just wanted to make sure I understand this. This totally makes sense now! Thanks for the help!

#8

Same question as before:

in CFAI EOC Q31, page 391, there is no mention of an ‘acquiring firm’. I understand that firm U simply hires the manager D, not his team or clients.

Is that also considered ‘portability’?