A carve-out is defined as a portion of a portfolio that is by itself representative of a
distinct investment strategy. It is used to create a track record for a narrower mandate from a multiple-strategy portfolio managed to a broader mandate. For example, the Asian securities from a Euro-Pacific portfolio or the equity portion of a balanced portfolio could be considered a carve-out. Carve-outs are generally based on asset class, geographic region, or industry sector.
So, what the highlighted portion means is that under GIPS after Jan 2010 only a partial portion of a portfolio performance consisting of many asset classes cannot be included in a performance composite of a single portfolio i.e. let’s say multi asset portfolio consisting of equity, bonds & gold then the performance of equity alone cannot be included in the equity composite.
Can you please explain the highlighted portion in simpler words? What is carve out?
Thank you for asking this question.
A carve-out is defined as a portion of a portfolio that is by itself representative of a
distinct investment strategy. It is used to create a track record for a narrower mandate from a multiple-strategy portfolio managed to a broader mandate. For example, the Asian securities from a Euro-Pacific portfolio or the equity portion of a balanced portfolio could be considered a carve-out. Carve-outs are generally based on asset class, geographic region, or industry sector.
Source : https://www.gipsstandards.org/wp-content/uploads/2021/03/carve_outs_gs_2011.pdf
So, what the highlighted portion means is that under GIPS after Jan 2010 only a partial portion of a portfolio performance consisting of many asset classes cannot be included in a performance composite of a single portfolio i.e. let’s say multi asset portfolio consisting of equity, bonds & gold then the performance of equity alone cannot be included in the equity composite.