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The Alexo Investment Management Group manages the investments for 30 retail clients. Alexo has full discretion over the investments of these clients’ assets. At the close of each day, the excess cash in the clients’ portfolios is swept into a money market fund. Alexo does not manage the money market fund, so it does not include the cash portion of the portfolio in its total return performance calculations. Alexo discloses its treatment of cash and cash equivalents in its performance presentation.
Which of the following statements regarding Alexo’s compliance with the Global Investment Performance Standards (GIPS) is CORRECT? Alexo is: A. in compliance with the GIPS standards. The Standards do not require excess cash to be included in total return performance calculations unless the composite consists primarily of cash or cash equivalents. B. not in compliance with the GIPS standards. The Standards require cash to be included in total returns calculations if the portfolio manager has control over the amount of the portfolio that is allocated to cash. C. in compliance with the GIPS standards. The Standards do not require cash or cash equivalents to be included in total return performance calculations unless the portfolio manager has control over the management of the cash or cash equivalents. |