I just got off the phone with a verification client who wanted to discuss attribution and the requirements of the Global Investment Performance Standards (GIPS(R)). Many firms want to include attribution in their marketing materials, and this is great! It provides the recipient with an idea as to the source(s) of the firm’s excess return and (hopefully) validates their claims.

There are no rules when it comes to GIPS and attribution, other than that attribution should be labeled as “supplemental information.” You have two choices:

1. show attribution of the full composite, where you treat the composite as a single portfolio
2. show attribution for a “representative portfolio” within the composite.

Two problems with representative portfolios:

1. Are they truly representative?
2. What happens when they leave? You’ll have to find another portfolio to use and link the results.

It’s really up to you which way you go.  Some composite systems allow you to aggregate the portfolios so that your composite looks like a single portfolio while others don’t provide this capability.

We were asked to provide some ideas on disclosure language:

• Supplemental Information: the attribution results are of a representative portfolio which is a member of the composite. We believe these effects are representative of the composite, in general, as well as the other accounts within it.   
• Supplemental Information: these results are of a representative portfolio which is in this composite. As with all representative portfolios there’s a risk that the one selected presents the results the manager wishes to display. All portfolios within this composite are managed in a very similar manner, and therefore we believe these results truly represent the composite and all the accounts within it.
• Supplemental Information: these results are of a representative portfolio which is in this composite. As with all representative portfolios there’s a risk that the one selected presents the results the manager wishes to display. To avoid this we chose the portfolio with the longest history. All portfolios within this composite are managed in a very similar manner, and therefore we believe these results truly represent the composite and all the accounts within it
• Supplemental Information: these results are of a representative portfolio which is in this composite. As with all representative portfolios there’s a risk that the one selected presents the results the manager wishes to display. To avoid this we selected the portfolio at random. All portfolios within this composite are managed in a very similar manner, and therefore we believe these results truly represent the composite and all the accounts within it

I think any of these would be fine; full, complete, and accurate disclosure is always best. You don’t want to mislead, so ensure that your language is accurate.