GIPS - Fees

What are the requirements vs recommendations on GIPS Fee Disclosure?

Is disclosing GROSS OF FEE returns a requirement or recommendation?

Is disclosing NET OF FEE returns a requirement or recommendation?

Either Gross fees or Net of fees is required but if Net of fess is shown than Gross of fess is recommended…

There are exceptions to the above for private real estate and private equity funds. In some cases either one or the other have to be shown. Not sure if this is relevant to CFA exam…I am a CIPM candiate and this was covered in my curriculum. See GIPS guidance statements on RE and PE for more information.

Non RE/PE = Either, but gross recommended

RE = Net, but both recommended

PE = Both

what about tarading expenses and the treatment of custody fees

Returns must be calculated after deducting all trading expenses. You can include custody fees in trading expenses if they are charged on a per-transaction basis.

custody fees are typically not included in gross of fee returns i thought (by not included i mean they are not deducted)

also, pretty sure real estate is gross OR net, not net but both recommended as darkstar said

Custody fees - Sorry, I am incapable of reading, custody fees are NOT included

RE - Sorry again, that was specifically for real estate closed-end composites

Wow I suck today.

For normal case either Gross of fees or net of fees can be shown. But if Net of fees is shown, than Gross of fees is recomended…?

Yes for RE-PE -----both gross of fees & net of fees

Gross of fees should be net of ACTUAL trading expenses. Modeled or estimated trading expenses are not allowed.

Net of fees should be net of actual trading fees, invst mgmt fees & performace fees, custody fees. Here Invst mgmt fees + performace fees can be ESTIMATED but needs disclosure…?

PE = both Gross and net of fee must

RE Gross or net of fee


RE = gross or net for TWR. Additionally, if RE closed end fund being reported SI-IRR must be reported net. Gross is optional.


Need your help.

Why don’t we deduct custody fees?

Many thanks

Because the manager typically has no say in who is providing administrative services, such as custody. The following is excepted from the GIPS guidance statement on fees:

“In general, there are three main types of fees and/or costs: investment management fees, trading expenses, and administrative fees. Administrative fees are defined as all fees other than trading expenses and investment management fees and include custody fees , accounting fees, auditing fees, consulting fees, legal fees, performance measurement fees, and other related fees. In some situations, the only fees that the firm controls are the investment management fees and the trading expenses (i.e., the actual cost of buying or selling investments). Therefore, only the investment management fees and the trading expenses should impact the firms returns. Even though custody fees are a necessary additional cost of owning a portfolio, many investment managers are not involved in the selection of the custodian or in the negotiation of the custody fees. Accordingly, in order to promote comparability, custody fees should not be reflected in (i.e., should not reduce) the firms returns.


All the best for your and all others AFers’ exam