The GIPS® standards require compliant institutions to disclose the frequency of rebalancing blended benchmarks. But is this enough? Should they not also be required to disclose the frequency the composite’s portfolios are rebalanced? Knowing one [the benchmark rebalancing] without the other [portfolio rebalancing] is inadequate, as this article demonstrates. If the frequency differs, the resulting excess return, or alpha, may seem false or misleading. This article addresses the potential for false or phantom alpha™ to be reported.

Beware of Phantom Alpha
David D. Spaulding, DPS, CIPM, TSG