What Do We Weight in Time-Weighting?

By David Spaulding, DPS, CIPM

I recently came across this quote by Georg Feuerstein, “As is often the case with household words, popularity does not necessarily imply understanding.”

We have so many terms in performance measurement that I suspect many practitioners don’t really understand. Terms such as time- and money-weighting, for example.

There is no weighting in time-weighting.

As I write this, I recall Tom Hanks in A League of Their Own. Perhaps we can ask him to read this in the same way he delivered the line, “There is no crying in baseball.”

If you were to ask most performance measurement professionals what “time-weighting” means, I suspect you’ll get a variety of answers, many of which will be incorrect.

What are the differences between Sharpe, Treynor, Sortino, and Information ratios? Are they truly risk-adjusted returns? Would you be comfortable debating this topic?

Why was asset-weighted standard deviation strongly recommended by the AIMR-PPS® but only permitted (i.e., not formally recommended) by the GIPS standards?

Why are GIPS composite returns asset-weighted rather than equal-weighted? And what are the three ways to accomplish this?

What distinguishes Brinson, Hood, Beebower from Brinson, Fachler, other than the names of three of the authors?

I guess one could debate what the term “understanding” means. Or, to what degree should we “understand” these terms.

I read this opening and immediately stopped to compose this piece. I think I’ll return to the book, in the hope I’ll find more to share with you!

Does the SEC Marketing Rule Really Require All of These Disclosures?

CFA Institute’s publication, Reconciling the GIPS® Standards and the SEC Marketing Rule, identifies 11 disclosures that are not required by the GIPS standards but may be required by the SEC Marketing Rule, depending on the facts and circumstances, when a firm distributes a GIPS Report as an advertisement.

But are all 11 actually required?

A review of Rule 206(4)-1 and its Adopting Release suggests a more nuanced answer. Many of these disclosures are not expressly mandated by the text of the Rule. Instead, their necessity often derives from the Rule’s general prohibitions, particularly paragraph (a)(1), which prohibits omitting a material fact necessary to make a statement, in light of the circumstances, not misleading, and paragraph (a)(6), which prohibits including or excluding performance results, or presenting performance periods, in a manner that is not fair and balanced.

This distinction is important. The Marketing Rule is intentionally principles-based. Rather than prescribing a disclosure for every situation, it frequently requires advisers to determine what information is necessary, given the facts and circumstances, to prevent an advertisement from being misleading.

Here’s my take on the CFA Institute list:

Reinvestment of income — Generally necessary.
If presented returns assume the reinvestment of income, failing to disclose that fact could leave the reader with an incomplete understanding of how the performance was calculated. Because reinvestment will generally increase cumulative performance, the assumption may be material to understanding the results. This is best viewed through paragraph (a)(1). If income is not reinvested, however, the need for a specific disclosure may be different.

Effect of market or economic conditions — Generally necessary when material.
The SEC has long been concerned about performance presentations that omit relevant market or economic context in a manner that could mislead investors. Where market conditions are material to understanding the performance shown, paragraph (a)(1) may require appropriate context.

Benchmark comparison disclosures — Facts and circumstances.
A benchmark comparison must not create a misleading impression. If differences between the portfolio and benchmark, or other facts concerning the comparison, are material to understanding it, they should be disclosed. If the comparison is readily understandable and speaks for itself, however, additional disclosure may not necessarily be required.

Description of the return presented — Generally necessary.
Readers need to understand what the performance figure represents. This follows both from the Rule’s specific performance requirements, including its treatment of gross and net performance, and from the broader obligation not to present performance in a misleading or unfair and unbalanced manner.

Current performance — Facts and circumstances.
Performance that has become stale may create a misleading impression, particularly where more recent performance would materially change the story being told. This is principally a general-prohibitions issue rather than a universal requirement that every advertisement present performance through the most recent possible date.

Criteria for related performance/composites — Generally necessary when material.
The Marketing Rule is particularly concerned with selective performance presentation. Appropriate disclosure concerning the criteria used to determine which portfolios are included can help demonstrate that the presentation is not cherry-picked. The amount of disclosure needed, however, should depend upon the circumstances and how readily the selection criteria can otherwise be understood.

Extracted performance — Disclosure may be necessary.
Extracted performance presents particular risks because the recipient is seeing only a portion of a portfolio’s results. Appropriate identification and explanation may therefore be necessary to prevent the presentation from being misleading. The Rule also contains specific requirements applicable to extracted performance.

Cash allocation for extracted performance — Generally necessary when material.
How cash is treated can materially affect an extracted performance calculation. If the allocation methodology affects the reader’s understanding of the results, disclosure is appropriate under the general prohibitions.

Hypothetical performance — Specifically addressed by the Rule.
Unlike many of the items above, hypothetical performance is expressly governed by paragraph (d)(6). An adviser presenting hypothetical performance must satisfy specific conditions, including policies and procedures designed to ensure that the performance is relevant to the likely financial situation and investment objectives of the intended audience and the provision of specified information concerning the hypothetical performance.

What About the Other Two?

I am less convinced that the following represent disclosures that are necessarily required by the Marketing Rule:

Possibility of loss.
There is no general requirement in Rule 206(4)-1 that every performance advertisement contain a standalone statement that investments may lose money. Such a disclosure could certainly be appropriate in some circumstances, particularly under the Rule’s fair-and-balanced treatment of material risks and limitations, but that is different from saying it must appear in every GIPS Report used as an advertisement.

Portfolio-by-portfolio related performance.
The Rule imposes requirements on the presentation of related performance, but that does not necessarily translate into a universal disclosure requirement concerning portfolio-by-portfolio performance. Whether additional information is needed should depend on the nature of the performance presentation and whether its omission would make the advertisement misleading.

The Bottom Line

The distinction between “expressly required” and “necessary to comply” matters.

Some disclosures are specifically mandated by the Marketing Rule. Others may effectively become necessary because, without them, a particular advertisement could be misleading, unbalanced, or incomplete under the Rule’s general prohibitions. Still others may not be necessary at all, depending on the facts and circumstances.

Consequently, I would hesitate to treat the CFA Institute list as 11 mandatory disclosures that must automatically be added to every GIPS Report. A better approach is to ask of each item:

Is this information expressly required by the Rule, or is it necessary in these particular circumstances to ensure that the performance presentation is not misleading and is fair and balanced?

That distinction is precisely what one should expect from a principles-based rule.

Special thanks to Lance C. Dial, Esq., Partner, K&L Gates LLP, for sharing his insights and perspective on the SEC Marketing Rule for this edition of Compliance Corner.

What to Expect From TSG in 2026

For information on the 2026 / 2027 events and partnership opportunities, please contact Patrick Fowler at 732-873-5700

The Journal of Performance Measurement^® Is Currently Accepting Article Submissions

The Journal of Performance Measurement is currently accepting article submissions on topics including performance measurement, risk, ESG, AI, and attribution. We are particularly interested in articles that cover practical performance issues and solutions that performance professionals face every day. All articles are subject to a double-blind review process before being approved for publication. White papers will also be considered. For more information and to receive our manuscript guidelines, please contact Douglas Spaulding at DougSpaulding@TSGperformance.com.

Submission deadlines

Fall Issue: October 16th, 2026

Winter Issue: January 15th, 2027

For any questions, please reach out to Doug Spaulding at DougSpaulding@TSGperformance.com.

As a reminder, all TSG verification clients receive full, unlimited access to our Insiders.TSGperformance.com site filled with tools, templates, checklists, and educational materials designed to make compliance and verification as easy as possible for you and your firm.

Contact CSpaulding@TSGperformance.com if you have any questions or are having trouble accessing the site.

Strangers in Time, by David Baldacci

Review by David Spaulding, DPS, CIPM

My wife, Kerry, and I were travelling to Las Vegas from our home in Ontario last month. We had a layover in Denver. I had begun reading Juneteenth by Ralph Ellison. After around 50 pages, I decided the book wasn’t for me, so I needed a new one. We went into a Tattered bookstore, where I saw this book. While I don’t think I’d ever actually read one of Baldacci’s books, I’ve listened to several, and enjoy his writing and storytelling, so thought I’d give this a try.

Well, I’m glad I did. I enjoyed it quite a bit.

The book involves three main characters: Charlie (a young teenager who has been orphaned), Molly (a slightly older teen), and Ignatius (a bookstore proprietor). The setting is 1944 London, during the time when Germany frequently dropped bombs on the city.

There is much to be uncovered about Molly’s parents and Ignatius’s background. I’d characterize the book is being a thriller, of sorts, but also an anti-war book, as we often encounter remarks that sound this way. Baldacci’s American, though does reflect a great deal of knowledge about England and its language (well, it’s form of English, that is). For example, Molly takes on the position of a “Nurse Auxiliary,” and is told the hospital provides breakfast, elevenses, lunch, and dinner. I guessed what elevenses was (perhaps you can, too), but confirmed it; as per Webster’s, it’s “a light refreshment (such as a snack) taken in the middle of the morning,” and is classified as a “British” term. Such attention to detail is important, to establish some credibility.

The book had my attention from the start: interesting characters, interesting interactions, painful events and experiences.

The book establishment Ignatius owns was his wife’s, who had died. He frequently refers to her in conversations, and at one point Molly questions this. His response is touching: “I think that one thing you try to do, above all, is to keep that person alive in your thoughts and words. You … you want to make sure that the person resides with you at all times.” This is something I can relate to, as I frequently speak of my first wife, Betty.

The losses each of these characters experience are ones that many of us have or will experience: the loss of a parent, spouse, friend.

The book is, at times, quite touching. The author is an exceptional writer. And the ending is not what I had expected. Yes, of course, I recommend it.