Terminated Portfolios and Composite Inclusion Duration

C

Composites must exclude terminated portfolios after the last full performance measurement period the portfolios were under management, but composites must continue to include terminated portfolios for all periods prior to termination. This is a requirement for creation and maintenance of composites.

The correct answer is C. Composites should include the terminated portfolio for the last full performance measurement period under which the portfolios were managed.

The AIMR-PPS (Association for Investment Management and Research - Performance Presentation Standards) provides guidelines for performance reporting in the investment management industry, including the calculation and presentation of investment performance results.

When a portfolio is terminated, it means that the investment manager is no longer actively managing that portfolio. In performance reporting, it is important to determine how long terminated portfolios should be included in the composite, which is a grouping of portfolios with similar investment strategies or objectives.

According to the AIMR-PPS, terminated portfolios should be included in the composite for the last full performance measurement period under which the portfolios were managed. This means that the performance of the terminated portfolios should be included in the composite until the end of the last complete period for which performance results are available.

For example, if a portfolio was terminated on December 31, 2022, and the performance measurement period is on a quarterly basis, then the terminated portfolio's performance would be included in the composite until the end of the last complete quarter for which performance results are available. If the last complete quarter ends on September 30, 2022, then the terminated portfolio's performance would be included in the composite until that date.

It's important to note that terminated portfolios should not be included in the composite beyond the last full performance measurement period they were under management. Including the terminated portfolio's performance beyond that period could distort the composite's performance calculation and make it less representative of the current investment strategy of the manager.

Therefore, the correct answer is C. Composites should include the terminated portfolio for the last full performance measurement period under which the portfolios were managed.