That I didn’t get … Teaton Investment Management (TIM) has recently developed a proprietary prediction model. To test the model, TIM created a returns history for an equity value portfolio using hypothetical assets and a back-tested asset allocation strategy. TIM intends to include the simulated portfolio results in its performance presentation. Which of the following most accurately describes TIM’s compliance with the Global Investment Performance Standards (GIPS)? (Assume that TIM is GIPS-compliant in all other areas). TIM is: A) GIPS-compliant as long as it discloses the inclusion of simulated returns in its performance presentation. B) GIPS-compliant if it includes the simulated portfolio in a composite that consists solely of simulated portfolios. C) not GIPS-compliant because the standards do not permit the inclusion of simulated portfolio results in performance presentations. D) GIPS-compliant as long as the simulated value equity portfolio is included in a value equity composite.
??? C ???
C)100% sure!!!
Schweser says “c”, but please go over the same problem in CFAI readings page 349 - Question 5 of Volume 6 and you will see that CFAI allows the presentation of simulated results with appropriate disclosure (A). I emailed Shw. regarding this contradiction and waiting for their answer.
The other answers are “including it” vs. “presenting it”
mo34 Wrote: ------------------------------------------------------- > Schweser says “c”, but please go over the same > problem in CFAI readings page 349 - Question 5 of > Volume 6 and you will see that CFAI allows the > presentation of simulated results with appropriate > disclosure (A). > > I emailed Shw. regarding this contradiction and > waiting for their answer. Thanks Mo, sorry about my “unfound” certaintity. As you can see, I only read Schweser portion for the GIPS…too scared to read CFAI version. Hats off to you.
The exact text from CFAI Book 6: … " This requirement does not restrict reinvestment managers from showing model results as supplemental information, but linking model returns to actual returns and showing the combined history as a continuous record would be misleading and thus is not permitted. If a firm presents model results as supplemental information, it must clearly label them". I understand we can’t link both simulated and real performance (this is not what the question says), but we’re allowed to show model results separately as indicated.
agreed with Mo34 and that the answer is C. you can show simulated results but you can’t present them as part of the historical performance.
strikershank Wrote: ------------------------------------------------------- > agreed with Mo34 and that the answer is C. > > you can show simulated results but you can’t > present them as part of the historical > performance. I actually picked (A) …
i was agreeing with what you posted just above my comment, not your original answer 
So this is the answer I got from Schw. “Hello, In this question it says that TIM intends to present the simulated results along with its performance presentation. This is not allowed according to GIPS. The performance results can only reflect actual portfolios. Simulated results can be shown to clients but this needs to be separate from the performance results and the simulated data needs to be disclosed. Regards, Kurt Schuldes, CFA”
It states no where in the question that they are “linking” the simulated performance with actual performance, it can be implied, but it doesn’t state it. They could have presented it as a seperate potential fund in their performance report or presentation.
That’s what I thought. At least they acknowledged that simulated performance can be presented. That’s not mentioned anywhere in their books.
so is the ans A
It’s “C” b/c they are adding the simulated performance into I guess their composite performance which is not allowed.
I chose A, infact our firm is AIMR and GIPS compliant…we show our actual portfolio and hyphotetical model returns on the same fact sheet but obviously don’t chain link the theoretical with the actual but is show separately…
Why can’t it be B?
I am still perplexed by the idea of anything from GIPS being interesting