Is it true that only net-of-fees performance is required? Gross-of-fees performance is recommended but not required?
you can use either gross of fees or net of fees, but it has to be mentioned on top of the column. If gross of fees are chosen, more disclosure is required. The last part, I can’t remember the disclosure exactly… I am leaving the GIPS review for next two hours I have left :).
Gross of fees is recommended as the prospective client wants to judge the investment skills and not fee negotiating ability of firm (net of fees are less mgmt fees…) thats how i wrote it down.
Gross of fees are less trading expenses. If not measurable you have to deduct whole bundeled fee or part of fee where trading expenses are included.
Disclosure: gross of fee when other expenses are subtracted, net of fees if any additional fees are subtracted in addition of trading expenses and mgmt fees (eg any perf fee).
Pls correct if im wrong
Good luck to all!
Standard 5.B.1 Gross of fees should be presented (recommendation)
Standard 2.A.4 All returns must be calculated after deduction of the actual trading expenses.
Standard 4.A.5 and 4.A.6:
When presenting gross of fees, disclose if any other fees are deducted in addition to the trading expenses.
When presenting net of fees, disclose if any other fees are deducted in addiction to trading expenses and management fees, if model or actual investment management fees are used, or if returns are net of performance based fees.
I believe, it’s either or for real estate.
and post 1/1/2011 required for PE.
non RE or PE - Recommentation is that both are presented. But pretty sure gross is required.
It seems unintuitive to me that net-of-fees would be optional and gross-of-fees recommended… the point of the return comparison is to see how one would do with active management versus passive management with the benchmark. A necessary cost of active management is the carried interest and management fees. It would be necessary to know what the net-of-fees return is for a person who wants to decide between active or passive investment.
net-of-fees is less comparable between 2 managers .
gross of fees reduces returns by trading expenses only , so it is highly comparable . Any more fees you add , makes the comparison much more difficult.
I thought that for non - private equity and non - real estate you could use either gross or net
Gross of fees is preferred since it lends to better comparison. Gross of fees refers to fees which are presented after trading expenses but before deduction of bundled fees I thought.
Bumping this old thread after notice “When presenting net of fees, disclose if any other fees are deducted in addiction to trading expenses and management fees, if model or actual investment management fees are used, or if returns are net of performance based fees.”
What is “model management fees”? Would it be used for bundled fees?
Model => maybe “simulation” fees? In a backtest ? I guess they are not speaking about simulation fees…