Intro to GIPS

Question 1

Explain why GIPS was created

Answer 1

GIPS are a set of ethical principles based on a standardized, industry-wide approach. GIPS seek to avoid misrepresentations of performance.

Question 2

Explain what parties the GIPS standards apply to

Answer 2

GIPS applies to investment management firms

Question 3

Explain who is served by the GIPS Standards

Answer 3

prospective and existing clients of investment firms and allows clients to more easily compare investment performance among investment firms

Question 4

Explain the purpose of composites in performance reporting

Answer 4

Composite - a composite is a grouping of individual discretionary portfolios representing a similar investment strategy, objective, or mandate. Reporting on the performance of composites gives clients and prospects information about the firms success in managing various types of securities or results for various investment styles.

Question 5

Explain the construction of composites in performance reporting

Answer 5

A composite, such as International equities, must include all portfolios (current and past) that the firm has managed in accordance with this particular strategy. The firm should identify which composite each managed portfolio is to be included in before the portfolios performance is known. This prevents firms from choosing portfolios to include in a composite in order to create composites with superior returns.

Question 6

GIPS - requirements for verification

Answer 6

Verification of GIPS compliance is recommended but not required (accurate description)

Verification is performed by a third party that must attest that the firm has complied with all GIPS requirements for composite construction on a firm-wide basis,

2. the firms processes and procedures are established to present performance in accordance with the calculation methodology required by GIPS, data requirements of GIPS, and in the format required of GIPS

Question 7

Verification - recommendations

Answer 7

Firms are encouraged to pursue independent verification. Verification applies to entire firms performance measurement practices and methods, not a selected composite. 2. Firms should include the follow disclosure language ([firm] has been verified for the periods [dates] by [verifier]. A copy of verification report is available upon request.