CREQUIREMENTS IN RETURN CALCULATIONS HOW TO CONSTRUCT A COMPOSITE

Requirements in Return Calculations

How to Construct a Composite:

Total returns.

All actual, fee paying discretionary portfolios must be included in

Total weighted returns.

at least one composite.

Accrual accounting

Add new portfolios to a composite at the start of the next

Asset weighted composites.

measurement period.

Cash and cash equivalents must be

Portfolios no longer under management should still be included in

included in composite returns.

the historical composite.

Quarterly calculations minimum.

Geometric linking.

Portfolios should not be switched to a different composite unless

changes in guidelines make it reasonable.

Deduct trading expenses.

Presentation:

Disclosure. Must indicate:

10 year record.

The availability of composite list.

Annual returns.

The number of portfolios in composite.

Can't restate returns for firm changes.

The amount of assets in composite.

Actual asset returns only.

The definition of the firm.

Whether the results are gross or net of management fees.

A measure of dispersion.