Arcadia they used Modified Dietz and the composite is current until Q1 2013. How is that not a violation? You can only use Modified Dietz until 1/1/2010…
>> You can only use Modified Dietz until 1/1/2010
i don’t remember seeing this restriction in the GIPS text.
Well after 1/1/2010 you can’t daily weight the Cash Flows to calculate the return. You need to value the portfolio before the cash flow, then the period after, and chain link the returns (TWR)
Kaplan:
Prior to January 1, 2005, ECFs could be treated as if they occurred in the middle of the time period (the original Dietz method). After January 1, 2005, until the current rules took effect on January 1, 2010, two methods were allowed to approximate time-weighted return:
- ECFs could be daily weighted (the modified Dietz method).
- The modified internal rate of return could be used. (MIRR is simply IRR, and modified refers to using IRR as an approximation for time-weighted return.)
From GIPS handbook: “the GIPS standards also transition to more precise calculation methodologies. Therefore, the GIPS standards require firms to calculate approximated time-weighted rates of return that adjust for daily-weighted external cash flows (e.g., Modified Dietz method) for periods beginning on or after 1 January 2005. For periods beginning on or after 1 January 2010, firms are required to calculate a more accurate time-weighted rate of return and are required to value portfolios at the time of each large cash flow, as well as at calendar month-end or on the last business day of the month.”
It does not say daily weighted CF is not allowed.
Also not sure what question you are referencing (1 for me is definition of the firm), so I assume you are talking about the question about policy 4,5,6. I was a little iffy on that, but WE KNOW cash and CE MUST MUST MUST Be included, so to me that was the largest flag of the group.