Which of the following is NOT a key characteristic of the Global Investment Performance Standards (GIPS)? GIPS: A) do not address every aspect of performance measurement, valuation, attribution, or coverage of all assets. B) are ethical standards for investment performance presentation to ensure fair representation and full disclosure of an investment firm’s performance history. C) require managers to include all actual fee-paying and non-fee-paying discretionary portfolios in composites defined according to similar strategy and/or investment objective. D) require firms to use certain calculation and presentation methods and to make certain disclosures along with the performance record. The correct answer was C) require managers to include all actual fee-paying and non-fee-paying discretionary portfolios in composites defined according to similar strategy and/or investment objective. The GIPS do not require managers to include non-fee-paying accounts in composites. Schweser says non-fee paying accounts need not be included, but a sample exam I took from CFAI said discretionary, non-discretionary, fee-paying, and non-fee paying must be included. Is Schweser wrong?
question asks for which is NOT correct…
I know that. Schweser is saying that non-fee paying do not need to be included. But CFAI says that they do need to be included. Here is an explanation from CFAI: Total firm assets must be the aggregate of the market value of all discretionary and nondiscretionary assets under management within the defined firm. This includes both fee-paying and non-fee-paying assets. SO the discrepancy is that CFAI seems to say that non-fee paying and non-discretionary portfolios should be included in composites, but SChweser says that managers need to only include the actual fee paying ones.
I think I know where I’m off now… GIPS do not require managers to include non-fee-paying accounts in composites. However, when calculating total firm assets for purposes of defining the firm, the assets must include all accounts (discretionary, fee paying, non fee paying, non discretionary). Does this make sense?
Nah, you are confused “the show NY” . When you define the FIRM for GIPS purposes, you include all discretionary and nondiscretionary assets under management within the defined firm. This includes both fee-paying and non-fee-paying assets. . However, for calculating COMPOSITES, you include only fee-paying discretionary accounts.
newsuper, thanks for the help. thats what i figured. i believe what you wrote is the same thing as my immediate post right above yours, correct?
yep, I was busy writing my post at the same time.
Bump; another solid question Firm = nonpaying + paying assets Composites = paying assets only
yeah cfacowtown, this is a great question. Keep bumping away, the more stuff like this the better. Keep up the good work.