Find back-testing period to prospective clients

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In March 1997, Smith & Jones Asset Management, a GIPS-compliant firm, introduced a new technical analysis model that management believed would be a powerful tool in tactical asset allocation. After extensive back-testing, Smith & Jones began to use the model to manage actual ''live'' portfolios in June 1997, and managers constructed a composite composed of actual, fee-paying, discretionary portfolios managed in accordance with the model. In 2000, after three very successful years of managing client funds in this way, management decided that because the actual performance of live portfolios validated the performance of the model, it should present the simulated performance of the model through the back-testing period to prospective clients. Smith & Jones proceeded to link the back-tested returns to the actual performance of the composite and presents 3-, 5- and 10-year performance as a continuous record to prospects.

Does this practice comply with the GIPS standards? WHY or WHY NOT?

Reference no: EM132999397

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