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Question:

Samuel Parkin, a principal of Argora Advisers, is in charge of preparing the firm’s performance history in accordance with GIPS. At the end of each year, he assigns each portfolio to a single composite based on its holdings over the year. He uses the mean annual total return of portfolios assigned to a composite as the composite’s return. With respect to GIPS compliance:

A neither of these actions complies with GIPS.
Explaination

To comply with GIPS, portfolios must be assigned to composites before the returns are known; assigning them at the end of the year is not acceptable. The composite return must be asset weighted not a simple average (equal-weighted). Asset weighting will ensure that the performance reported will be representative of (if not exactly equal to) the performance of all the accounts assigned to a single composite over the reporting period.