Ethics / GIPS

Question 1

Professional Conduct Program Process

Answer 1

Question 2

AMC Risk Management / Compliance / Support MUST haves

M A P M E E E

Answer 2

Question 3

GIPS vs Standards Differences

Answer 3

Question 4

Other fundamentals of GIPS compliance

Question 5

GIPS: The Firm and Discretion

Answer 5

Question 6

GIPS: Portability of Performance (eg if acquiring a firm)

Answer 6

1) MEMORIZE THE FOUR FROM THE PHOTO BELOW,
2) NOTE: you have one year to connect/link performance if you mess up GIPS compliance or don’t have it right away at acquisition

–> so you CAN continue to claim GIPS compliance for a year even if you haven’t proven anything yet / the acquired assets are not yet in compliance

Question 7

GIPS Objectives

Answer 7

Question 8

GIPS Composites

Answer 8

Question 9

Modified Dietz

Answer 9

approximate way to measure returns, adjusting for large external cash flows (ECF)

Example (calc in photo):

Day 1 value = $100

Day 7 = contribution of $2 (value is now 112)

Day 28 value = $117.6

Question 10

Time-weighted Return Calc

Answer 10

Example (calc in photo):

Day 1 value = $100

Day 7 = contribution of $2 (value is now 112)

Day 28 value = $117.6

Question 11

GIPS Fair Value Valuation Hierarchy

Answer 11

See photo below

NOTE: appraisals (RE and PE) are not ideal because they don’t equal FV –> try to get a better comparable

Question 12

Composites characteristics / must haves

Answer 12

photo below, PLUS:

• composites must include new portfolios on a timely and consistent composite-specific basis after each portfolio comes under management
• composites must include only those portfolios that are managed for the full performance measurement period for which the composite return is calculated
• terminated portfolios must be included in the historical performance of the composite up to the last full period that each portfolio was under mgmt, and for which the firm has discretion
• portfolios must not be moved from one composite to another uneless documented client-directed changes to a port invmt mandate, objective, or strategy (NOT tactical changes), or redefinition of the composite make it appropriate –> historical performance of the portfolio must remain with the original composite in this scenario
• if there are significant cash flows (ie big enough to impede the firm from timely implementation of the strategy), temporarily exclude portfolio from composite or create and report on a temporary new account taht contains cash until it can be invested or securities until they can be divested
• 3 ways to measure:
  1) return from each portfolio, using weighted avg using bgn of period portfolio values or;
  2) return from each portfolio using wtd avg of portfolio returns plus external cas flows weighted like in denominator of Mod Dietz

OR

3) aggregate return method –> treat composite assets and ECF as relating to a single portfolio, then compute the Mod Dietz for this “mega portfolio”

Question 13

Internal Dispersion

Answer 13

Question 14

what you need in order to use time weighted returns in a composite

Answer 14

Question 15

Verification

Answer 15

See photo

NOTE:

Verification = for the FIRM

performance examination = for the COMPOSITE

CAN’T VERIFY ONLY A COMPOSITE OR ONLY PART OF A FIRM