Reading 32 Overview of the Global Investment Performance Standards

Question 1

Firms that claim to comply with GIPS standards must disclose the use of a sub-advisor and?

Answer 1

Firms that claim to comply with the GIPS standards must disclose the use of a sub-advisor and the:

• period the sub-advisors were used.
• investment strategies employed by the sub-advisors.

!!! not identity of sub-asvisor!!!

Question 2

TVPI?

Answer 2

• TVPI - total value divided by since inception paid-in capital.
• RVPI - residual value divided by since inception paid-in capital.
• DPI - since inception distributions divided by since inception paid-in capital.

TVPI = RVPI + DPI

Question 3

Dietz formulas

Answer 3

Original:

r_Dietz=(V₁−V₀−CF)/[V₀+(CF×0.5)]

Modified:

r_ModDietz=(V₁−V₀−CF)/[V0+∑_i=1ⁿ(CF_i×w_i)]

Question 4

Which of the following items is NOT required as part of a private equity performance presentation?

• Net-of-fees since inception IRR
• Capital drqwn down from partners during the year
• Gross-of-fees since inception IRR

Answer 4

The SI-IRR must be presented both gross and net of fees.

Since inception paid-in capital must be shown not just the capital drawn down for the year.

Question 5

Firm X currently claims complaince with the GIPS but uses settlement-date accounting. Beginning January 1, 2005, what must Firm X do to remain complaint?

Answer 5

Standard 1.A.45 requires that firms use trade-date accounting for periods beginning January 1, 2005. These firms, will not be required to recalculate performance results that were presented in accordance with the Standards for periods to January, 2005.

Question 6

Assume that on October 20, 2005, Firm X, which is in compliance with the GIPS, acquired the assets for Firm Z, which is not in compliance with the GIPS standards. Until what date may the Firm X continue to claim compliance with the Standards before it must have the assets of Firm Z GIPS compliant?

Answer 6

Under GIPS standard 5.A.48.b if compliant firm acquires os is aquired by a non-compliant firm, the firms have one year to bring the non-compliant firm’s acuired into compliance.

Question 7

How should be presented a wrap fee presentation to a potential wrap fee client?

Answer 7

Performance presentation to potential wrap fee clients must be net of the entire wrap fee.