On the last reading, the dreaded GIPS, and I wanted to get some tips on how to tackle this.
Have read through the entire CFA curriculum and taken my own notes, but I look at this section and just want to shoot myself in the head. What’s the best way to tackle this? I know there are a bunch of requirements/recommendations that you just have to memorize so I’m wondering If I can just go through the summary at the end of the reading, then focus on learning the topic via the EOC questions and just writing down all the answers? Then just hit the topic tests to “spot learn” and learn what I need to know via the questions/answers.
Or, should I just bite the bullet and take notes on this chapter? Just want to finish this material and never have to take notes or read through the CFAI curriculum ever again. So close to being done, but this GIPS shit is making it seem so far away
Establish global best practices for calculating and presenting performance
Facilitate accuracy and transparency
Facilitate comparison of historical performance
Encourage full disclosure and fair global competition
Encourage self-regulation The key characteristics of GIPS include
Voluntary, minimum standards
Mix of requirements and recommendations, must be adhered to with the goal of full disclosure and fair representation (which likely requires going beyond the minimum GIPS requirements)
Only investment firms NOT individuals can claim compliance
Compliance must be on a firm-wide basis, NO partial compliance is allowed
Full disclosure is mandated (no cherry-picking performance)
Composites must include ALL fee-paying, discretionary portfolios
It covers all asset classes
Data integrity is paramount to the process
Provides standards where regulated industry standards are still lacking
The GIPS is constantly evolving with standards getting STRICTER over time
How it will be tested
I think the most likely GIPS questions would ask you to examine a GIPS return report and talk about factors presented or omitted that violate the GIPS requirements. The results will usually come in a table with the following column headers and then the elements listed below. Anything that is missing is a red-flag and should be IDed as not adhereing to GIPS.
You need:
Years
Composite Return
Benchmark
portfolios
Internal dispersion measure
Amount of composite assets
Total Firm assets
As well as:
Correct GIPS compliance statement
Definition of the firm
Description of the composite
Composite creation date and complete list of composites (available upon request)
Policies for valuing portfolios, calculating performance, and preparing presentations (upon request)
Currency use
Description of benchmarks (or why there is none)
Minimum of 5 years of returns and going up to 10
ID whether net or gross fees
Management fee schedule (upon request)
3 year ex-post standard deviation or another measure of internal dispersion and explanation
I kept going in this blog post if you want a quick and dirty summary (reporting requirements, return calculations, asset class specific considerations and so on)
I decided to read it and take notes. I then completed all of the EOC. The summary above me looks pretty good, although I think it’s probably worth while to bite the bullet and read it.
Rather than create a new topic, just wanted to ask if there is a need to remember the dates on which changes have occurred. For example, do I need to remember that before a certain date you could use the original Dietz method and after that date you then have to use another method?