Question : Dylan O’Connor is a portfolio manager at JEMStone Asset Management. He makes all the investment decisions for the portfolios in the firm’s Emerging Market composite, supported by JEMStone’s research department and trading desk. Acella Investment Advisors is seeking to establish an emerging market investment strategy and hires O’Connor to join Acella. Can Acella link O’Connor’s historical performance while at JEMStone to the performance of its new strategy and comply with the GIPS standards?
CFA says that we can bring Dylan’s performance to Gemstone, but I thought that only applies to a firm that’s being acquired, not an individual. Can someone kindly explan? CFAI Answer is below
CFAI Answer :Acella must determine if O’Connor’s performance track record meets all of the portability requirements. Acella must have records supporting the performance of portfolios currently in the composite and those that were previously managed to the strategy but have since terminated. The firm must also be comfortable that Mr. O’Connor was the primary decision maker for the strategy while at JEMStone and that the strategy will remain substantially intact and independent once at Acella. If these requirements are met, Acella may port the track record, but the ported composite must pass one more test if the firm wishes to link performance: There must not be a break in the track record between the past firm and Acella. For example, if O’Connor left his prior firm at the end of February 2019 and did not start with Acella until 1 May 2019, there will be a break in the track record and Acella must not link to the prior performance.