I think PJStyles asked if somebody had a summary of GIPS - I started to review this tonight (out of the GIPS Manual) and typed this stuff up (its the only way I can digest this). Its REQUIREMENTS only (not recommendations) for INPUT DATA/CALCULATION/COMPOSITE/DISCLOSE/PRESENTATION - I didn’t review Fundamentals of Compliance, Real Estate, Verification or Private Equity. I also bulleted off the Dispersion types allowed at the end. Hope it helps… (a quicker read at least)… D_M INPUT DATA REQUIREMENTS 1. Capture and maintain all data to support presentation 2. Portfolio valuations on Market Values (not cost/BV) 3. Valuation Frequency: • Jan 1, 2010 – Large Cash Flows 4. Jan 1, 2010 – value portfolios at calendar month end or the last business day of the month 5. Jan 1, 2006 – use trade date accounting 6. Accrual Accounting for Fixed Income Securities/other assets that accrue interest (MV of securities MUST include accrued Income) 7. Jan 1, 2006 – composites have start and end valuation dates. UNLESS composite is reported on a non-calendar year – dates MUST be calendar year end or last business day CALCULATION: 1. Total return – including realized and unrealized gains/losses and income 2. Time weighted returns that adjust for external cash flows. Chain link periodic returns. Treat cash flows in a consistent manner and document this manner. • Jan 1, 2005 – use approx rates of return that adjust for daily cash flows • Jan 1, 2010 – value portfolio on date of large external cash flows 3. Composite returns MUST be calc’d using asset weights of the individual portfolios using BEGING values or a method that reflects both beginning values and external cash flows 4. Cash / Cash equivalent returns MUST be included in calculations 5. Returns MUST be calc’d AFTER the deduction of actual trading expenses incurred during the period. CANNOT deduct estimated trading expenses. 6. COMPOSITE RETURNS: calc composite returns by asset weighting the individual portfolio returns: • Jan 1, 2006 – Quarterly • Jan 1, 2010 – Monthly 7. If actual trading expenses cannot be identified and segregated from a bundled fee: • When calc’ing GROSS-OF-FEES returns – returns MUST be deducted should be the entire BUNDLE FEE or the portion of the bundled fee that includes the trading expense • When calc’ing NET-OF-FEES returns – returns MUST be deducted should be the entire BUNDLE FEE or the portion of the bundled fee that includes the trading expense and the INVESTMENT MANAGEMENT fee COMPOSITE CONSTRUCTION: 1. Include all fee paying discretionary portfolios in at least one composite. You can also include non-fee portfolios (non-discretionary portfolios not allowed) 2. Composite Definition should be to similar investment strategies/objectives 3. Composite MUST include new portfolios in a timely basis when they come under management (UNLESS CLIENT SAYS NO!) 4. Include the performance of Terminated portfolios in historical returns in the appropriate composites UP TO the LAST FULL measurement period 5. Do not switch between composites UNLESS documented changes in client guidelines or the redefinition of the composite makes it appropriate to do so. The historical record SHOULD remain with the composite. 6. Treat convertible / hybrid securities consistently across time and within composites 7. CARVE OUT segments (excluding cash) cannot represent a discretionary portfolio and cannot be included in a composite. SINGLE ASSET CARVEOUT MUST INCLUDE CASH. This will not be allowed after Jan 1, 2010 unless CARVE OUT IS MANAGED SEPARATELY WITH ITS OWN CASH BALANCE. 8. Composites should only include assets under mgmt within the FIRM. Cannot link to simulated and actual portfolios together, 9. If a minimum portfolio value is set – cannot include anything below it and cannot apply it retroactively. DISCLOSE: 1. Definition of FIRM 2. Availability of a complete list and description of Composites 3. Minimum asset levels (if any) (and changes) of portfolios not included in composite 4. The currency used to state performance 5. The presence and use of derivatives (if material), leverage – including description of use, frequency and instrument characteristics 6. CLEARLY label GROSS-OF-FEES and NET-OF-FEES 7. Relevant details related to withholding tax treatment on dividends, interest, capital gains. 8. Known inconsistencies in exchange rates used AMONG portfolios in a composite and BETWEEN composite and benchmark 9. If Presentation conforms with local laws / regulations and not GIPS – disclose this and why they differ 10. Presentation before Jan 1, 2000 that doesn’t comply with GIPS?, state why and what period. 11. Jan 1, 2010 – single asset carve outs represented as a composite – state the policy used to allocate the cash to the returns. 12. FEE SCHEDULE appropriate to presentation 13. Composite contains portfolio with bundled fees – show percentages per annual period shown. 14. Composite contains portfolio with bundled fees – show types of fees included in bundle. 15. Show GROSS-OF-FEES – any other fees besides Transaction Costs? 16. Show NET-OF-FEES – any other fees besides Transaction Costs and Management Fees? 17. “Additional information is available” relating to policies for calculations and reporting. 18. Jan 1, 2006 – MUST state the use if Sub-Advisor and the time period 19. ALL significant events that could help client interpret the performance record 20. Composite descriptions 21. If the firm is redefined, state date and reason. 22. Composite redefined – state date and reason (cannot apply retroactively!) 23. Composite name change 24. Composite Creation date 25. Before Jan 1, 2010 – if calendar month end or last business day isn’t used for valuation date 26. Dispersion measure PRESENTATION AND REPORTING: 1. For Each composite • Minimum of 5 years of performance (or since inception) that meets GIPS requirements – add additional years until 10 years is shown • Annual returns for all years • # of portfolios (unless there are less than 5 portfolios for the full year – then not required) | Amount of Assets in composite | composite percentage of the total firms assets or the amount of the Total Firms assets at the end of a period. • Measure of dispersion of individual portfolios returns for each annual period (unless there are less than 5 portfolios for the full year – then not required) 2. Can link non-GIPS compliant returns to compliant history (if certain requirements are met – Cannot present non-compliant after Jan 1, 2000) 3. Cannot annualize partial year returns 4. (a) Can link to track records of a past firm if: • Substantially all decision makers are employed by new firm (research, portfolio managers, other staff) • Staff remains intact and independent in new firm • Has records to support history (b) State that they are linked © One firm joins another? Composite performance of both firms must be linked to ongoing returns if substantially all the assets from the past firm transfer into the new firm (d) If a compliant firm acquires a non-compliant firm – 1 year to bring it into compliance 5. Jan 1, 2006 – composite includes or is a single asset class – include the % of composite that is carveout 6. BENCHMARK: Benchmark performance should be for each annual period – if no benchmark, then explain WHY no benchmark. If there is a change in benchmark – disclose date of change and why. 7. Any non-fee paying portfolios in the composite? Show % of total Composite at the end of the annual period. Dispersion types allowed (including but not limited to:) • High and Low annual returns • Interquartile Range • Standard Deviation of (equal or asset weighted annual returns) • Range of annual returns

I had just finished reviewing my GIPS notes and was thinking I wish I had a cheat sheet made up. You rock! Thanks.

No prob Big Babbu - this could be some material points on the test and I know how bad it sucks to try and memorize this. Anyone want to take on Real Estate/PE, Advertising, or Verification? Feel free… ;-D

Dude, you rule! This is just what I needed…was just thinking I need to review GIPS but this was the only SS I didn’t take notes on…

Data_Monkey THANK YOU!!!

Thanks a lot

thanks dude!!

thank you. I used to review the GIPS PDF file. now I will use yours!!

Here is a summary for Real Estate and Private Equity - REAL ESTATE Real Estate Asset class should exclude: • Publicly traded real estate securities, including REIT’s • Commercial MBS’s • Private debt instruments – including commercial and residential loans solely related to interest rates For real estate calculations: • All return calculations must use beginning capital adjusted for TW CF’s during the period • Total return = RI + RC ….on a Qtrly basis they should equal. Q - Requirements? • Valued at market at least annually. From Jan 2008 – at least quarterly • Valuation must be done by an outside, independent party certified to perform such valuations • Disclose calculation methodology o Geometric, TWRR; Total return includes Income + CG o Basically - Income and capital appreciation components must also be presented o Adjusted such that Income return + Capital return = Total return PRIVATE EQUITY • Excludes open-end and evergreen funds. It includes closed-end funds. • Note: In these, redemptions and subscriptions may be made after the funds inception and hence do not have fixed levels of capital with a set number of investors. • Vintage year: Yr in which capital was first drawn down or called from investors PRESENTATION AND REPORTING REQUIREMENTS • Must present both net-of-fees and gross-of-fees annualized IS-IRR of the composite for each year since inception • For each period presented, firms must report o Paid-in-capital to date (cumulative drawdown) o Total current invested capital o Cumulative distributions to date • Must report following multiples: o TVPI – total value to PIC o DPI – Cumulative distributions to PIC o PIC – Paid in capital to committed capital o RVPI – residual value to PIC • Cumulative SI-IRR for appropriate benchmark o If no benchmark, why? VALUATION PRINCIPLES • With integrity and in a professional manner • Individuals with necessary experience and ability • Direct supervision of senior mgmt • Review procedures must be documented • Valuation basis should be transparent • Full disclosure of methodologies • Fair value basis – must recognize when any asset has fallen in value • Consistent manner • Changes must be explained and if material – then reported • Prepared ANNUALLY GIPS VERIFICATION • Primary purpose – increased confidence • Review performance and procedures by an independent 3rd party verifier • Verification report is issued • Single verification report for the ENTIRE firm – cannot be done for single composite • Not a requirement, but strongly encouraged • Verifiers must obtain complete list of open and closed a/c’s for all composites for the yrs under examination, ensure composite construction is proper. FORMULAE FOR REAL ESTATE: Only 3 to know - Capital employed (CE) = beg CF + weighted sum of remaining CF’s Capital return = (MV1 - MV0 - capex + SAles proceeds)/ CE Income return = (accrued inome - NR expenses - taxes paid - interest)/CE Total return = RC + RI

You guys are the best!! Many thanks!

Amazing guys, thanks.

Thanks Inconel for helping to round it out. Did we miss anything that might be important? Advertising? Is that is all that is left?

Avertising is def worth mentioning. One of these dark horses

That’s amazing!!! Thanks a lot!!!

Fantastic effort guys: another point - - asset weighting (used in calculating composite returns) has to be done at least quarterly. Though there is no mention of text as to how often composites have to be calculated. i’m assuming monthly bec port returns are calculated monthly

Awesome! Thanks! Where do I send my cheque??

thanks guys

Seriosuly - how the heck do you guys keep up with the Zillion+ posts??? … I study for an hour or two and drop by to see another 200 posts. Never ceases to amaze me!!

I study and post in bursts… looking for hints and tips (there are some real nuggets on here).

Is it true that for Asset Manager Code of Professional Conduct BOTH gross- and net-of-fees must be disclosed but for GIPS gross- OR net-of-fees must be disclosed? Isn’t this an inconsistency or am I missing something? Can someone kindly clarify this a little bit for me. Many thanks.