GIPS Flashcards
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Compliance Issues
Investment firmwide (not applicable to individuals)
You cannot claim partial compliance with GIPS.
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Input Data Requirements
Input Data Requirements
Data must be documented based on fair value, using trade date accounting, and including accrued income for fixed-income
If market value of a security does not exist, the preferred fair value approach sequence is to use:
- Similar assets in active markets.
- Similar assets in inactive markets.
- PE, Div. Yield, etc
- Discounted cash flow
Valuing portfolios at least monthly and on the date of all large external cash flows (ECFs);
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Calculation Methods
Calculation Methods
Sub-period returns are geometrically linked to calculate time-weighted return that is reported by year.
o However, if the manager controls the timing of ECFs, money-weighted (IRR) return calculations must be used.
Must include impact of manager decisions to hold cash equivalents, even if a third party manages the cash.
Returns can be reported gross (after trading expenses) or net of investment management fees.
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Composite Construction
Composite Construction
GIPS reporting is done by composite (group of accounts with comparable investment objectives)
o Composite return can be weighted by beginning value (BV) or beginning value plus weighted ECFs (pro-rata time).
“All actual fee-paying discretionary accounts must be included in at least one composite:”
o Model and hypothetical results must be excluded
o Non-fee paying accounts can be included
o Non-discretionary accounts must be excluded
o Accounts below a relevant minimum size can be excluded
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Required Disclosures
Required Disclosures
- GIPS compliance statement
- Firm definition
- Description of the composite.
- Relevant benchmark.
- FX used
- Fee schedule.
- Composite dispersion (not required if < 6 accounts)
- External dispersion: Annualized STDev of trailing 36 months for the composite and benchmark
- Composite creation date.
- A list of terminated composite provided on request (last 5yrs).
- Policies for valuing, calculating, and presenting performance provided on request.
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Presentation and Reporting
Presentation and Reporting
Annual
Include benchmark and Composite
5yrs at least
Disclose:
o The number of accounts in the composite (if >6).
o The amount of assets in the composites and in the firm (or percentage of firm assets made up by this composite).
Cannot be changed (unless to report a mistake)
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Real Estate (RE) and Private Equity (PE)
Real Estate (RE) and Private Equity (PE)
· RE valuation is quarterly and can be done internally by the firm.
o At least every 12 months by a qualified external source.
o Every 36 months if the client agrees.
· PE valued annually (both gross and net of fees).
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Wrap Fees/Separately Managed Accounts (WFSMA)
Wrap Fees/Separately Managed Accounts (WFSMA)
apply where:
account is managed by a sub-advisor.
sponsor serves as an intermediary
client pays the sponsor one fee and the sponsor pays the sub-advisor.
Both the sponsor and sub-advisor comply with GIPS.
