Podcast
Questions and Answers
Which of the following parties may adopt and claim compliance with Global Investment Performance Standards (GIPS)?
Which of the following parties may adopt and claim compliance with Global Investment Performance Standards (GIPS)?
- A software firm that developed a software package that assists investment firms in achieving GIPS compliance.
- The chief compliance officer for a regional money manager.
- An investment management firm located in Indonesia. (correct)
The section of the Global Investment Performance Standards (GIPS) that outlines defining the firm and documenting firm policies and procedures is:
The section of the Global Investment Performance Standards (GIPS) that outlines defining the firm and documenting firm policies and procedures is:
- GIPS Advertising Guidelines.
- Composite and Pooled Fund Maintenance.
- Fundamentals of Compliance. (correct)
Which of the following statements most accurately describes the requirements for GIPS verification?
Which of the following statements most accurately describes the requirements for GIPS verification?
- Verification of GIPS compliance is recommended, but not required. (correct)
- Third-party verification is required for a firm to claim compliance with GIPS.
- A firm must select a representative set of composites for third-party GIPS verification.
When measuring and presenting their investment performance, GIPS compliant firms are required to:
When measuring and presenting their investment performance, GIPS compliant firms are required to:
The purpose of composites in a GIPS-compliant performance presentation is to:
The purpose of composites in a GIPS-compliant performance presentation is to:
When verifying a firm's compliance with Global Performance Investment Standards (GIPS), the verifier must:
When verifying a firm's compliance with Global Performance Investment Standards (GIPS), the verifier must:
Which of the following statements most accurately describes verification under the Global Investment Performance Standards (GIPS)?
Which of the following statements most accurately describes verification under the Global Investment Performance Standards (GIPS)?
McGregor Investment Management promotes itself as a fixed-income investment management firm. The vast majority of the discretionary portfolios it manages are fixed-income portfolios. McGregor does, however, manage a few portfolios utilizing a growth equity investment strategy, but the firm has no intention of ever promoting this strategy. Under the Global Investment Performance Standards (GIPS), must these portfolios be included in a composite?
McGregor Investment Management promotes itself as a fixed-income investment management firm. The vast majority of the discretionary portfolios it manages are fixed-income portfolios. McGregor does, however, manage a few portfolios utilizing a growth equity investment strategy, but the firm has no intention of ever promoting this strategy. Under the Global Investment Performance Standards (GIPS), must these portfolios be included in a composite?
Lora Murphy has an account at Ferrell Investments, a GIPS-compliant firm. Murphy invests in small-cap value stocks and pays Ferrell a standard fee to execute her buy and sell orders, but does not permit her account manager to initiate trades on her behalf. According to GIPS, is Ferrell required to include Murphy's portfolio in their small-cap value stock composite?
Lora Murphy has an account at Ferrell Investments, a GIPS-compliant firm. Murphy invests in small-cap value stocks and pays Ferrell a standard fee to execute her buy and sell orders, but does not permit her account manager to initiate trades on her behalf. According to GIPS, is Ferrell required to include Murphy's portfolio in their small-cap value stock composite?
With regard to Global Investment Performance Standards (GIPS), if the Chief Investment Officer of an investment advisory firm also is a CFA charterholder:
With regard to Global Investment Performance Standards (GIPS), if the Chief Investment Officer of an investment advisory firm also is a CFA charterholder:
Which of the following statements most accurately describes why the Global Investment Performance Standards (GIPS) were created?
Which of the following statements most accurately describes why the Global Investment Performance Standards (GIPS) were created?
Which of the following is least likely one of the eight sections of the GIPS standards for firms?
Which of the following is least likely one of the eight sections of the GIPS standards for firms?
Which of the following statements about a GIPS-compliant firm's verification of GIPS compliance is most accurate? Verification is:
Which of the following statements about a GIPS-compliant firm's verification of GIPS compliance is most accurate? Verification is:
Flashcards
Who can claim GIPS compliance?
Who can claim GIPS compliance?
Only an investment firm that actually manages assets can claim compliance with GIPS.
Fundamentals of Compliance
Fundamentals of Compliance
The section of GIPS that outlines defining the firm and documenting firm policies and procedures.
GIPS verification requirements
GIPS verification requirements
Verification of GIPS compliance is recommended, but not required. If chosen it must be performed by a third party.
Terminated accounts under GIPS
Terminated accounts under GIPS
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Purpose of Composites
Purpose of Composites
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Verifier's Attestation
Verifier's Attestation
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Verification report scope
Verification report scope
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Discretionary portfolios and composites
Discretionary portfolios and composites
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Non-discretionary portfolio
Non-discretionary portfolio
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Purpose of Composites
Purpose of Composites
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Reason for GIPS creation
Reason for GIPS creation
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GIPS Sections
GIPS Sections
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GIPS Compliance Verification
GIPS Compliance Verification
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Study Notes
- GIPS compliance can only be claimed by an investment firm that manages assets.
Fundamentals of Compliance
- This GIPS section outlines defining the firm and documenting firm policies/procedures.
- It is the foundation for firm-wide compliance and creates boundaries to determine total firm assets.
GIPS Verification
- It is recommended, but not required.
- GIPS requires any verification to be performed by a third party.
- It should apply to the firm's entire methods and practices, rather than selected composites.
Investment Performance Measurement
- GIPS compliant firms must include terminated accounts in performance history.
- Excluding terminated accounts introduces survivorship bias.
Composites in GIPS
- Composites give clients and prospects data about past performance in managing investments; they show various asset classes or investment strategies.
Verifying Firm Compliance
- The verifier must attest that a firm's processes and procedures are set up to present performance as required by GIPS.
- They must comply with all GIPS requirements for composite construction on a firm-wide basis.
- Verification is not a GIPS requirement.
- Any verification applies to the entire firm, not individual composites, and must be done by an independent third party.
- A verification report is issued for the entire firm, not a single composite.
Portfolio Inclusion
- GIPS requires all discretionary portfolios to be included in a composite.
- If a portfolio owner restricts the firm's investment strategy, it should be designated as non-discretionary and excluded from the firm's composites.
GIPS Application
- GIPS adoption is VOLUNTARY, and applies to firms, not individuals (like a CFA charterholder CIO).
Composites
- Composites inform investors how well a firm manages different securities or investment strategies.
- Firms should determine which composite each managed portfolio will be included in before the portfolio's performance is known.
- This prevents selective inclusion and artificial creation of composites with superior returns.
GIPS Objective
- CFA Institute created GIPS to meet the need for a single globally accepted set of investment performance presentation standards.
- GIPS are voluntary for investment management firms.
Eight Sections of GIPS Standards
- Fundamentals of Compliance
- Input Data and Calculation Methodology
- Composite and Pooled Fund Maintenance
- Composite Time-Weighted Return Report
- Composite Money-Weighted Return Report
- Pooled Fund Time-Weighted Return Report
- Pooled Fund Money-Weighted Return Report
- GIPS Advertising Guidelines
GIPS Compliance Verification
- It is optional, but if a firm chooses to obtain GIPS verification, it must be performed by an independent third party.
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