OVERVIEW OF THE GLOBAL INVESTMENT PERFORMANCE STANDARDS Flashcards
Identify the main objectives of the GIPS
- Advance the interests of investors and increase their confidence in the investment industry.
-Provide accurate and comparable data to investors.
-Create a globally accepted standard for the determination and presentation of investment performance.
-Facilitate fair competition among global investment managers.
-Encourage self-regulation in the global investment industry.
How many years does a firm has to be compliance with GIPS before claiming compliance
Minimum of 5 years or for the period since firm inception if the firm has been in existence for less than five years.
Whats the performance computation approach that must be used
Time-weighted rate of return approach
If the portfolio is not value everyday, what approximations can we make to calculate return
Modified Dietz Return : EV - BV - EFC / BV + Adjusted ECF
Modified internal rate of return (MIRR)
What are the GIPS requirements regarding portfolio that are not publicly traded.
Private markets portfolios values and returns has to be calculated quarterly.
Pooled funds not in a composite must be valued annually
For firm that controls the timing and size of the External cash flows (ECFs), what other return calculation approach would be more appropriate
Money weighted return - Must be calculated at least annually.
Under GIPS, what is the difference between the Net returns and gross returns
Gross returns deduct transaction cost from net returns.
Transaction cost includes brokerage commissions, spreads, exchange fees. Custody fees should NOT be included
Identify example on which to base composite construction
Equity style
Benchmark
Equity or bond sector
Risk/Return Profile using measure such as tracking error
Investment strategy such as sector rotator, fundamental analysis, factor timing.
Identify what should be included in the composite report in terms of returns and risk measures
Time-weighted returns for the composite and benchmark
Amount of firm assets
Amount of composite assets
The number of portfolio in the composite if there are more than 6.
Describe what does internal dispersion measure indicates and give constraints about the measure
It indicates how consistent the portfolio performance is within the composite and, only portfolio that has been in the composite for at least a year can be included in the dispersion calculations.
Describe how the firm should present the historical dispersion for the composite and benchmark using standard deviation. Include details on the time period, frequency, and data used for this calculation.
The firm has to use the ex post standard deviation. Also, the first must report that ex post standard deviation for each annual period, separately for both the composite and the benchmark and need to use the last 3 years of data on annualized basis.
