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1. You are a performance analyst at ABC Investment
Management, a firm that follows the GIPS standards. You
are preparing a compliant presentation for a composite that
includes all discretionary portfolios invested in US equities.
You notice that one of the portfolios has a large cash
allocation that is not typical for the composite. You decide
to exclude this portfolio from the composite to avoid
distorting the performance results. Is this action consistent
with the GIPS standards?
 A) Yes, because the portfolio is not representative of the
composite's investment mandate.
 B) Yes, because the portfolio has a material difference in
its asset allocation.
 C) No, because the portfolio is discretionary and meets
the definition of the composite.
 D) No, because the portfolio has a similar risk profile as
the other portfolios in the composite.
 *C) No, because the portfolio is discretionary and meets
the definition of the composite.*
 Rationale: The GIPS standards require that all , feepaying, discretionary portfolios must be included in at least
one composite defined by investment mandate, objective,
or strategy. The cash allocation of a portfolio is not a valid
reason to exclude it from a composite.
2. You are a performance analyst at XYZ Asset
Management, a firm that claims compliance with the GIPS
standards. You are responsible for calculating and reporting
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