I was like 99% sure I read that you can do either one, as gross is only “recommended” (of that im 100% sure, just re-read it). But recently I had a buddy who swears you MUST show net of fees return, and I think i encountered a question that was kind of vague but pushed you in that direction. I searched the text high and low and found no explicit statement to either way, but it did reference showing both gross and net, as if it was permissible either way. Can someone confirm, with reference, if you can show either or? [exuding PE which is gross AND net SI-IRR]
I think you can show either and just have to cleary disclose and labelle. For PE its net and gross is must.
As odd as it sounds, I think GIPS requires either or, but Asset Manager Code of Professional Conduct requires both. I had the same confusion but that is what I concluded…
That is what I had understood as well. I am certain with AMC.
In general, its either gross or net , but you have to disclose which one. However, they RECOMMEND that you use gross. For RE, its also gross or net. For Private Equity, its both gross and net .
markCFAIL Wrote: ------------------------------------------------------- > I was like 99% sure I read that you can do either > one, as gross is only “recommended” (of that im > 100% sure, just re-read it). > > But recently I had a buddy who swears you MUST > show net of fees return, and I think i encountered > a question that was kind of vague but pushed you > in that direction. I searched the text high and > low and found no explicit statement to either way, > but it did reference showing both gross and net, > as if it was permissible either way. > > Can someone confirm, with reference, if you can > show either or? You are correct. You must show net of fees. Gross of fees is only recommended. I distinctly remember getting this question on one of the online sample exams and it said this same thing. So either the question is incorrect or the materials have been misleading.
That was definitely an answer on the sample exam. Has anyone decided if that question was actually correct though? Not uncommon for CFA mocks to have errors.
“Presentation and Reporting — Recommendations 5.B.1 FIRMS SHOULD present GROSS-OF-FEES returns.” So do they mean that IN addition to the net of fees, you should present gross of fees? And if it is true that it is Net-OF fees , the reason should be that they are always lower, right?
They recommend gross of fees disclosures because they are more easily comparable across different countries or even up against benchmarks. Trading costs are taken out, since these are unavoidable costs- but after that, those costs that can be deducted in a net of fees calculation vary widely. So they suggest gross- but it’s not a requirement.
Im not getting this. Arent you supposed to disclose BOTH!
AMC- disclose both- REQUIRED GIPS- you can present either, but gross is RECOMMENDED GIPS, P/E: net of fees and gross of fees SI-IRR Wrap Fees/SMA- must present returns after deduction of all BUNDLED FEES (this makes sense if you think about it)
Don’t know if this helps, but I’m looking at the Asset Manager Code right now… Per the AMC: “At a minimum, Managers should provide clients with gross- and net-of-fees returns and disclose any unusual expenses.”
smokin’hot Wrote: ------------------------------------------------------- > AMC- disclose both- REQUIRED > > GIPS- you can present either, but gross is > RECOMMENDED > > GIPS, P/E: net of fees and gross of fees SI-IRR > > Wrap Fees/SMA- must present returns after > deduction of all BUNDLED FEES (this makes sense if > you think about it) This was everyones take, however have you taken the sample exam? The question specifically says a violation took place because they did not report net of fees returns.
For the exam I am sticking to what smokin’hot said. Straight from the book.
Paraguay, not sure which question you are referring, but if it was asking about AMC< it would have been a violation, yes.
No it specifically dealt with a mid cap gips compliant composite.
Paraguay. Dude. Then I have no idea.
Paraguay Wrote: ------------------------------------------------------- > smokin’hot Wrote: > -------------------------------------------------- > ----- > > AMC- disclose both- REQUIRED > > > > GIPS- you can present either, but gross is > > RECOMMENDED > > > > GIPS, P/E: net of fees and gross of fees > SI-IRR > > > > Wrap Fees/SMA- must present returns after > > deduction of all BUNDLED FEES (this makes sense > if > > you think about it) > > > This was everyones take, however have you taken > the sample exam? The question specifically says a > violation took place because they did not report > net of fees returns. Was there supplemental information to convert from gross to net?
Paraguay Wrote: ------------------------------------------------------- > No it specifically dealt with a mid cap gips > compliant composite. I think smokin’s notes are good. I remember the sample saying that gross of fees is only recommended for GIPs. Smokin thanks for the comprehensive list. I’ll have to make a note of that.
I just did the CFAI sample exams and I have to agree with Paraguay. Question 23 of sample 2 mentioned that the column “net of fee” is required while the column “gross of fee” is only recommended. GIPS is freaking confusing!