Performance Perspectives Blog

Equal-weighting … can it be done?

by | May 11, 2011

I had a call yesterday with a client who wanted to know if they can show equal-weighted composites. Recall that GIPS(R) (Global Investment Performance Standards) requires composites to be asset-weighted (something which I have grown to consider perhaps not to be appropriate, but that will be taken up at length in an upcoming article). And so, is it permitted to show an equal-weighted composite?

Yes! Provided (a) you have an asset-weighted version which is your actual presentation, (b) that you don’t use the equal-weighted version as the presentation, but rather, (c) label it as “supplemental information.”

Firms can use supplemental information to go well beyond the requirements of GIPS. The rules deal with the materials GIPS requires, but not items outside of GIPS, other than provisions as outlined in the Supplemental Information Guidance Statement, which you should familiarize yourself with.