GIPS

Question 1

Representative Accounts

Answer 1

Showing a top-performing portfolio as representative of a firm’s results

Question 2

Survivorship Bias

Answer 2

Excluding “weak performance” accounts that have been terminated

Question 3

Varying Time Periods

Answer 3

Showing performance for selected time periods with outstanding returns

Question 4

GIPS

Answer 4

Global Investment Performance Standards. A set of ethical principles based on a standardized, industry-wide approach. Investment firms can participate on a voluntary basis.

Question 5

Composite

Answer 5

A grouping of individual discretionary portfolios representing a similar investment strategy, objective or mandate. Must include all fee-paying, discretionary portfolios (current and past) that the firm has managed in accordance with this particular strategy

Question 6

Verification Requirements

Answer 6

• Must be preformed by a third party, on a firm-wide basis
  Verifier must attest that firm has complied with all GIPS requirements for composite construction on a firm-wide basis and processes/procedures established to present performance in accordance with the calculation methodology required by GIPS

Question 7

Verification Reccomendations

Answer 7

• Firms encouraged to pursue independent verification (verification applies to entire firm’s performance not just composite)
• Should include the Verification statements on material

Question 8

GIPS Objectives

Answer 8

1. Obtain global acceptance of calculation and presentation standards in a fair, comparable format with full disclosure
2. Ensure consistent, accurate investment performance data in areas of reporting, records, marketing and presentations
3. Promote fair competition among investment management firms in all markets without unnecessary entry barriers for new firms
4. Promote global self regulation

Question 9

Key Characteristics of GIPS

Answer 9

1. Firms must be defined. Should reflect the distinct business entity that is held out to clients
2. Performance presentation is fair representation of results and full disclosure
3. Include all actual fee-paying, discretionary portfolios in composites for a minimum of 5 years or since inception with goal of 10-year data minimum
4. Use certain calculation and presentation standards and make specific disclosures
5. Input data must be accurate
6. GIPS contain required and recommended provisions and firms encouraged to accept the recommended
7. Firms encouraged t