A Flashcards
Describe the key features of the GIPS standards and the Fundamentals of Compliance
GIPS Objectives
Globally calc. and present standards in a fair, comparable format with full disclosure
Ensure consistent, accurate investment performance data in areas of reporting, records, marketing, and presentations
Promote fair competition among investment management firms in all markets without unnecessary entry barriers for new firms
Promote global ‘self regulation’
Key characteristics of GIPS
Investment management firm must define its “firm” as a “distinct business entity”
GIPS = ethical standards for performance presentations which ensure fair representation of results and full disclosure
Include all actual fee-paying, discretionary portfolios in composities for amin. 5 years or since firm or composite inception. After presenting 5 years of compliant data, the firm ust add annual performance each year going forward up to a min. 10 years.
Firms are req. to use certain calculation and presentation standards and make specific disclosures.
Accurate input data
Required and recommended provisions
Present all pertinent additional and supplemental information
Only full compliance can be claimed
Follow local laws if laws conflict with GIPS but disclose this
CErtain recommendations may become requirements in the future.
Supplemental private equity and real estate provisions contained in GIPS are to be applied to those asset classes
FofComp: Definition of the Firm
Req: Apply GIPS on a firm-wide basis
Firms must be defined as a distinct business unit.
Total firm assets include total market value of discretionary and non-discretionary assets, including fee-paying, and non-fee-paying accounts
Include asset performance of sub advisors, as long as the firm has discretion over sub-advisor selection
If a firm changes it organization, historical composite results cannot be changed.
Recommended: Include the broadest definition of the firm, including all geographical officers marketed under the same brand name.
FofComp: Document Policies and Procedures
Document, in writing, policies and procedures the firm uses to comply with GIPS
FofComp: Claim of Compliance
[insert name of the firm] has prepared and presented this report in compliance w/ the GIPS
No such thing as partial compliance
No statements referring to calculation methodologies used in a composite presentation as being ‘in accordance with GIPS’ or the like
Similarly, there should be no such statements referring to the performance of an individual, existing client as being “calculated in accordance with GIPS” or the like, unless a compliant firm is reporting results directly to the client.
FofComp: Firm fundamental responsibilities
Provide a complient presentation to all prospects (prospect must have received a presentation w/ in the previous 12 months)
Provide a composite list and composite description to all prospects that make a request. List discontinued composites for at least 5 years.
Provide, to clients requesting it, a compliant presentation and a composite description for any composite included on the firms list.
When jointly marketing w/ other firms, if one of the firms claims GIPS compliance, be sure it is clearly defined as separate from noncompliant firms.
Firms are encouraged to comply with recommendations and must comply w/ all requirements. Be aware of updates, guidance statements, and the like.
