2015, Study Session # 1, Reading # 4

GLOBAL INVESTMENT PERFORMANCE STANDARDS (GIPS)

IMF = Investment
Management
Firms
CVG = Country Version
of GIPS

4.a

GIPS Objectives

Global acceptance of calculation & presentation standards (fair & full

disclosure).

Consistent & accurate investment performance data data in areas of reporting,
records, marketing & presentations.

To promote fair competition among IMFs & global self regulation.

Key Characteristics of GIPS

Define firm (reflect distinct business entity).

Ensure fair representation of results & full disclosure.

Include portfolios (fee-paying, discretionary) in composite for a minimum of five
years or since inception. Add annual performance each year to minimum of ten
years.

Use certain calculation & presentation standards & make disclosures.

GIPS contain both required & recommended provision.

Present all additional & supplemental information (encouraged).

Input data must be accurate & no partial compliance.

Follow local law in case of conflict with GIPS (disclose the conflict).

Certain recommendation may become requirements.

Private equity & real estate provisions are to be applied to these asset classes.

Fundamental of Compliance
Definition of the Firm

Requirements

Recommendations

Total firm assets include total MV of

discretionary & non-discretionary assets (fee
paying & non-fee paying).

If firm has discretion over sub-advisor
selection (include sub-advisors
performance).

Historical composite results will not change
(if firm changes its organization).

Include broadest definition of the firm (all

geographical offices).

Document Polices & Procedures (requirements)

Document, in writing, polices & procedures the
firm uses to comply with GIPS.

Claim of Compliance (requirements)

Following accordance statement must used;
[insert name of firm] has prepared and presented this report in
compliance with the Global investment performance standards
(GIPS).

No partial compliance & the statement calculated in accordance with
GIPS is not used for calculation methodologies & individual clients
(unless reporting portfolio results directly to that client).

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2015, Study Session # 1, Reading # 4

4.a

Firm Fundamental Responsibilities (requirements)

Compliant presentation to all prospects.

List of composite descriptions to all prospects that make a request (list
discontinued composite for at least 5 years).

Separate noncompliant firms from GIPS compliant firm in case of joint
marketing.

Be aware of updates, guidance statements & the like.

4.b

Definition of firm corporation, subsidiary or division held out to

client as a distinct business entity.

No non-compliant performance is presented for any periods after Jan
1st, 2000.

4.c

Firms may claim GIPS compliance for any CVG-compliant results prior
to Jan1, 2006.

Include CVG-compliant data to GIPS compliant until a minimum of ten
years of compliant performance is presented.

4.d

Major Sections of GIPS

0. Fundamental of Compliance

1. Input Data

Fundamental issues include:

Firm definition & documentation
of policies & procedures.

Complying with GIPS updates.

Appropriate compliance claim &
verification statement.

Should be consistent for full, fair

& comparable presentations.

3. Composite Construction

Assets-weighted composite for fair
presentation.

Composite returns are asset-weighted
avg of returns on the portfolios
included in each composite.

6. Real Estate
Certain provisions in Sections 0-5 do
not apply to all real estate investments
or are superseded by provisions in this
section.

2. Calculation Methodology

Certain methodologies for portfolio
return calculation & certain other for
composite return calculations.

Uniformity is required for
comparability.

4. Disclosure

5. Presentation & Reporting

Disclosure about performance &

policies.

There are some disclosures that all
firms must make while there are
others which are not applicable to all
circumstances for all firms.

Incorporate necessary return &

disclosure information according
to requirements of GIPS
standards.

7. Private Equity

Must be valued according to GIPS
Private Equity Valuation Principles.

Open-end or evergreen fund follow
regular GIPS.

8. Warp Fee/Separately Managed Account (SMA) Portfolios

Some provisions in section 0-5 are supplemented or replaced
by the provisions specified in this section.

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