Asset Weighting Methodology for AIMR-PPS Composites

Explanation

Composites must be asset weighted using beginning-of-period weightings. This is a requirement for calculation of returns.

According to the AIMR-PPS (Association for Investment Management and Research - Performance Presentation Standards), composites must be asset weighted using beginning-of-period weightings.

Asset weighting is a methodology used to calculate the performance of an investment portfolio or composite by considering the relative weights of different assets within the portfolio. It provides a more accurate representation of the performance of the composite because it takes into account the changing values of individual assets over time.

The beginning-of-period weightings refer to the asset weights assigned at the start of the performance period. This means that when calculating the composite performance, the weights assigned to each asset within the composite are based on their values at the beginning of the period under consideration.

Using beginning-of-period weightings ensures that the composite performance reflects the decisions and allocations made at the start of the period, providing a consistent and fair measure of performance across different composites. This methodology is preferred because it eliminates the potential bias introduced by changes in asset values during the performance period.

In summary, the AIMR-PPS requires composites to be asset weighted using beginning-of-period weightings to calculate their performance accurately and consistently. Therefore, the correct answer to the question is option D: beginning-of-period weightings.