Wrap Fee Accounts

[RoccoLee]

Is there anyone can explain the concept of Wrap Fee Accounts for me, please?

And what should be focus for Wrap Fee Accounts in GIPS?

Thanks a lot!

[sunseeker]

Hi Rocco,

I think it has to do with bundled fees definition which means it entails administrative, commission, and management expenses.

If this is the case GIPS clearly say that you have the following definition :

Gross-of-fees returns = gross return - actual trading expenses

Net-of-fees return = GoF returns - mgt fees

If we deal with wrap fee accounts and you are unable to clearly identify the actual trading costs you incurred then you deduct the total amount of bundled fees, that’s my understanding though.

[RoccoLee]

@sunseeker

Hi Rocco,

I think it has to do with bundled fees definition which means it entails administrative, commission, and management expenses.

If this is the case GIPS clearly say that you have the following definition :

Gross-of-fees returns = gross return - actual trading expenses

Net-of-fees return = GoF returns - mgt fees

If we deal with wrap fee accounts and you are unable to clearly identify the actual trading costs you incurred then you deduct the total amount of bundled fees, that’s my understanding though.

Wrap fee account means the firm acts like a intermediary between the clients and sponsors, and charge a bundle fee from sponsors, right?

[sunseeker]

if you mean with “sponsor” an asset manager or Private equity or whatever firm whose business is making money through financial markets then I’d say yes.