- “Firms must present a minimum of five years of GIPS compliant history or since inception if less than five years. After presenting at least five years of compliant history, the firm must add annual performance each year going forward up to ten years, at a minimum.” So if I understand correctly, if it is 2010 and I want to claim compliance, I have to first show compliance from 2005 - 2010 (or if I started my firm in 2007, then 2007-2010), and then every year after 2010 I have to continue to show compliant performance until we reach 2015. Showing compliant performance before 2005 is only recommended. 2. Standard 4.A.6 says it must be disclosed “if model or actual investment management fees are used.” Does this imply that while trading expenses may not be estimated/modeled, investment management fees may be? 3. Does a three year annualized ex post standard deviation satisfy the requirement for internal dispersion?
- correct. 2. is correct, recommendation is they are accrued 3. yes, using monthly returns. Standard deviation of composite returns using the range.
thanks for this confirmation. still a little shaky on #3. do you think you could tell me why the dispersion measure is noncompliant in schweser book 5 page 215 (last line). “Dispersion is measured as the standard deviation of monthly composite returns.” they say this is external.
External (across time periods) is different from internal (across portfolios).
ok thanks. few more. 1. On the practice Q on the CFA website, for #14 it says that “A) Pricing Source” does not comply with GIPS. What is wrong with the Pricing Source note: “The pricing source was changed prior to the end of the reporting period because in management opinion, performance was not fairly represented. The new source has significantly improved the firm’s results” 2. On Sample Exam 2, why is Policy 2 permitted? It says “Large and mid cap equity portfolios are revalued on the date when capital equal to 10 percnt or more of current market value is contributed or withdrawn. Small cap and fixed income portfolios use a 5 percent threshold.” i thought this was wrong because portfolios should be valued at each external CF.
Date of large cash flows. Policy must be posted.
Are you answering the 2 questions in reverse (date of large cash flows for second question and policy posted for first Q)? So date of large cash flows is required but ALL external cash flows is just recommended?
yes only recommended. You have to post the policy on when the portfolio will be included and what the portfolio cash flow is. Doesn’t have to be the same for each composite. i.e. a big cash flow in small caps may be 3% and in large caps may be 10%. it is recommended that you invest/withdraw the cash flow in a separate account and then combine the portfolio rather than removing it from the composite as well, when large cash flow policies include/exclude portfolios from the composite.