| Description |
ABC Investment Management acquires a new, very large account with two
concentrated positions. The firm’s current policy is to add new accounts for the
purpose of performance calculation after the first full month of management.
Cupp is responsible for calculating the firm’s performance returns. Before the end
of the initial month, Cupp notices that one of the significant holdings of the new
accounts is acquired by another company, causing the value of the investment to
double. Because of this holding , Cupp decides to account for the new portfolio as
of the date of transfer, thereby allowing ABC Investment to reap the positive impact of that month’s portfolio return. Which of the following statements is true? |