Reading 5 GIPS Standards Flashcards
Why should investment managers adhere to investment performance standards?
To assure investors that the firm’s investment performance is complete and fairly presented. Further, by adhering to a global standard, firms in countries with minimal or no investment performance standards will be able to compete for business on an equal footing with firms from countries with more developed standards.
Describe the Calculation Methodology section of the GIPS standards.
This section includes the definitions of specific methods for return calculations of portfolios and composites.
Describe the Input Data section of the GIPS standards.
This standard specifies input data to be used to calculate investment performance. For periods beginning on or after January 1, 2011, all portfolios must be valued in accordance with the definition of fair value and the GIPS Valuation Principles.
Under what conditions may a firm link non-GIPS-compliant performance records to their compliant history?
As long as the non-compliant record is not for data after January 1, 2000.
Describe the Wrap Fee / Separate Managed Account (SMA) Portfolios section of the GIPS standards.
Firms must include the performance record of all wrap fee / SMA portfolios in the appropriate composites in accordance with the firm’s established portfolio inclusion policies.
What is the minimum amount of historical investment performance a firm must present?
Five years; if in existence for less than five years, the presentation should include performance since inception.
Describe the Composite Construction section of the GIPS standards.
Composites should be constructed to achieve consistency and fair presentation.
Identify the compliance recommendations with regard to GIPS standards.
Firms should comply with the recommendations of the GIPS standards.
Firms should be verified.
Firms should adopt the broadest, most meaningful definition of the firm.
Firms should provide annually to each existing client a compliant presentation of the composite in which the client’s portfolio is included.
Describe the Disclosure section of the GIPS standards.
Requirements for disclosure of information pertaining to a firm’s policies and performance presentation.
List the key features of GIPS standards.
Ensure full disclosure and fair representation of investment performance.
Adhere to the recommendations of the standards to achieve best practice in the calculation and presentation of performance.
Include all actual, discretionary, fee-paying portfolios in at least one composite defined by investment mandate, objective, or strategy to prevent cherry-picking best performance.
The accuracy of performance presentation is dependent on the accuracy of input data.
Firms must comply with all requirements of the GIPS standards. They cannot claim partial compliance.
Describe the Fundamentals of Compliance section of the GIPS standards.
Definition of a firm, documentation of policies and procedures, maintaining compliance with any updates, and ensuring proper reference to the claim of compliance with GIPS and references to verification of GIPS.
Describe the Private Equity section of the GIPS standards.
GIPS Private Equity Valuation Principles must be used to value private equity investments, except for open-end and evergreen funds.
