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CFA Learning > GIPS > Flashcards

GIPS Flashcards

1
Q

What are GIPS standards?

A

Ethical principles that establish a standardized approach for investment firms to follow in calculating their historical investment results to prospective clients.

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2
Q

What is the misleading practice of “Representative Accounts?”

A

Selecting a top-performing portfolio to represent the firm’s overall investment results for a specific mandate.

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3
Q

What is survivorship bias?

A

Presenting an average performance history that excludes poor performing portfolios.

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4
Q

Why would presenting portfolios with varying time periods a misleading practice?

A

It makes it difficult or impossible to compare the results of the portfolios.

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5
Q

Is compliance with GIPS mandatory?

A

No. It is voluntarily.

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6
Q

What two choices do firms have when it comes to GIPS

A

Comply with all GIPS requirements and claim compliance through GIPS compliance statement

or

Not comply at all and not to make any reference to it.

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7
Q

Does a firm actually have to manage the assets for which they are claiming compliance?

A

Yes.

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8
Q

Who benefits from GIPS compliance?

A

The investment management firm and prospective clients.

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9
Q

Could obtaining GIPS compliance improve internal controls?

A

Yes.

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10
Q

How do investors view firms that are GIPS compliant?

A

Investors have more confidence in these firms.

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11
Q

Does GIPS require the use of composites?

A

Yes

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12
Q

Who regulates the claim of GIPS compliance?

A

The firm itself.

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13
Q

Who can perform the verification of a firm’s claim of GIPS compliance?

A

An independent third party.

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14
Q

Does GIPS verification be on the entire firm or specific composites?

A

The entire firm.

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15
Q

What are the four key features of GIPS?

A

Ethical standards for investment performance - full disclosure

Inclusion of all actual, discretionary, fee-paying portfolios in a minimum of one composite

Reliance on the integrity of data through accurate inputs using specific calculation methods and required disclosures

Compliance with all GIPS

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16
Q

What is included in GIPS advertising?

A

Full and fair disclosures that reaches out to potential clients. All information receives the same prominence.

17
Q

If the law contradicts GIPS standards, which one do you follow?

A

The law.

18
Q

Should you disclose the fact that the law contradicts GIPS standards?

A

Yes.

19
Q

Should all communications with clients have identical frequency?

A

Not necessarily, some clients prefer to communicate more.

20
Q

Can a firm claim partial GIPS compliance?

A

No.

21
Q

What do you think might be something that would help clients understand the performance report that should be disclosed?

A

The firm’s policy on computing returns.

22
Q

Why do you think it matters if a firm discloses whether or not it is verified?

A

It lets the clients known that the firm’s claim has been reviewed by an independent third party.

23
Q

What does GIPS stand for?

A

Global Investment and Performance Standards

24
Q

GIPS requires firms to present historical performance up to a minimum of ______ years.

A

5 years

25
Q

If the inception of an investment firm is fewer than five years, how long should the historical performance be presented?

A

For all years.

26
Q

After the initial presentation of GIPS, firms are required to continue adding a year of presentation information until ______ years of data are presented

A

10 years

27
Q

In what instances can a GIPS compliant firm include non-GIPS-complaint performance?

A

If it was for periods before January 1, 2000 and it is properly disclosed.

28
Q

Input data provisions of GIPS after 2010 included what?

A

Monthly valuations at year end, and on large cash flows.

29
Q

After January 1, 2011 what did portfolio valuation change?

A

Changed from market value to fair value.

30
Q

GIPS Standards requires that total returns are used for portfolios. Do you think this should include returns from cash and cash equivalents?

A

Yes

31
Q

Composite returns must be calculated by asset-weighted portfolio returns at least _____

A

monthly

32
Q

What type of portfolio would you want to see included in a composite of performance?

A

Discretionary.

33
Q

Are discretionary, fee-paying portfolios required to be included in composites

A

Yes

34
Q

Are discretionary, non fee-paying portfolios required to be included in composites?

A

It is optional.

35
Q

Should terminated portfolios be included?

A

Yes.

36
Q

Should carve-outs be included in a composite?

A

No. Unless they are managed separately.

37
Q

How frequent can portfolio returns be calculated with real estate?

A

Quarterly.

38
Q

Do you think that non-GIPS compliant returns can be linked with GIPS compliant returns for presentations?

A

No

39
Q

Portfolio returns must be calculated at least ______, at _____

A

annually; fair value.

CFA Learning (5 decks)

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