GIPS: Wrap Fee/SMA Provisions

I don’t know why, but I don’t want to read the few pages regarding this subtopic. What do you think are the most important 3 to 5 points to know about Wrap Fee/SMA provisions?

I can remember two obscure things: Wrap fee = one single fee that can’t separate out components (eg. 1% Ad-valorem) * Since you can’t separate trading costs, gross returns reported will not be net of trading costs, and net returns will be net of trading costs, and management fees i.e. the wrap fee (so you have to report returns both as net and gross of fees) * You have a choice to split off a separate composite for SMA accounts even if the mandate is identical to non-SMA. If you combined them in a single composite, your composite perf. will appear a bit lower What else guys? JD

jbaphna Wrote: ------------------------------------------------------- > I can remember two obscure things: > > Wrap fee = one single fee that can’t separate out > components (eg. 1% Ad-valorem) > * Since you can’t separate trading costs, gross > returns reported will not be net of trading costs, > and net returns will be net of trading costs, and > management fees i.e. the wrap fee > (so you have to report returns both as net and > gross of fees) > * You have a choice to split off a separate > composite for SMA accounts even if the mandate is > identical to non-SMA. If you combined them in a > single composite, your composite perf. will appear > a bit lower > > What else guys? > > JD I think there are instances where a firm can identify and separate the trading costs. If they are able to do this, they can just deduct the trading cost. Otherwise, they have to deduct the entire fee.

bpdulog you are missing the point about “Wrap/SMA fee accounts” this provision specifically applies to where the subadvisor hits the clients “bundle fee” without decomposing it. You are refering to general GIPS provisions…we are specifically discussion SMAs here. volume 6 page 332

jbaphna Wrote: ------------------------------------------------------- > bpdulog you are missing the point about “Wrap/SMA > fee accounts” this provision specifically applies > to where the subadvisor hits the clients “bundle > fee” without decomposing it. You are refering to > general GIPS provisions…we are specifically > discussion SMAs here. volume 6 page 332 I think you’re missing the point buddy. This was taken directly from page 333 in Volume 6: We saw earlier that, if the actual direct trading expenses cannot be identified and segregated from a bundled fee, returns must be reduced by the entire bundled fee or the portion of the bundled fee that includes the direct trading expenses (I.2.A.5.a–b) (Level III Volume 6 Portfolio: Execution, Evaluation and Attribution, and Global Investment Performance Standards , 4th Edition. Pearson Learning Solutions 333).

FACE

Damn should have gone with searchable soft copy of curriculum, perhaps I am missing the point. I am confused, what make Wrap Fee accounts special and why do they even have special GIPS provisions? Sidebar: SkipE99-- What is FACE? save face?

it means you got taken to the bank shun. I would say CHIN though.

Bump for my main question: what makes Wrap Fee accounts special and why do they even have special GIPS provisions?

The idea I think is to level playing field , direct trading expenses shoul always be deducted in gross-of-fees . If a firm claims it is too difficult because of small account sizes and number of these , and then proceeds to give a number for gross-of-fees that does not include ANY trading expenses at all , GIPS says no , you can’t do it. If u can’t separate out direct trading exp it then reduce gross returns by a bundled fee that has the trading exp in it. SMA account will show even lower returns then Its not rocket science , it is straightforward IMO