Reading 4 - GIPS

#1

All of the following are titles of one of the nine sections of the Global Investment Performance Standards (GIPS) EXCEPT: A) Input Data. B) Real Estate. C) Implementation. "Implementation" is not a name of one of the nine major sections of the GIPS standards. C

#5

Assume that on January 1, 2005, a firm with no Global Investment Performance Standards (GIPS) compliant history since its inception four years ago wishes to claim compliance with GIPS. Which of the following accurately reflects the appropriate action for the firm to take? A) Comply with GIPS for all four periods since the firm's inception. B) Nothing, a firm must have five years of compliant performance history to claim compliance with GIPS. C) Comply with GIPS for the year beginning January 1, 2002, and report its performance prior to this date with a disclosure of why the earlier years are not GIPS compliant. In order to claim GIPS compliance, a firm must present at least five years of annual investment performance that is compliant with GIPS. If a firm or composite is less than five years old, the performance since the inception of the firm or composite must be presented. A

#3

The El Rey Investment Company, located in Barcelona, Spain, is in the process of adopting the Global Investment Performance Standards (GIPS) for the current fiscal year. One of the GIPS standards is in direct conflict with Spanish investment reporting regulations. In order to be in full compliance with GIPS, El Rey must: A) comply with the local regulation and make full disclosure of the conflict. B) choose either the GIPS standard or the local regulation, whichever is the more conservative approach, and make full disclosure of the conflict. C) comply with the GIPS standard and make full disclosure of the conflict. A GIPS requirement is that firms comply with the local law and make full disclosure of the conflict. A

#8

The provisions for each section of the Global Investment Performance Standards (GIPS) are divided between: A) fee-paying and non fee-paying portfolios. B) minimum standards and recommendations. C) requirements and recommendations. Firms must meet all requirements in order to claim compliance with the GIPS standards, and are encouraged to adopt and implement the recommendations. C

#6

The section of the Global Investment Performance Standards (GIPS) that outlines defining the firm and documenting firm policies and procedures is: A) Disclosures. B) Fundamentals of Compliance. C) Presentation and Reporting. According to Section 0, Fundamentals of Compliance, the definition of the firm is the foundation for firm-wide compliance and creates boundaries in order to determine total firm assets. B

#7

Which of the following is NOT an important characteristic of how a firm defines itself? The firm definition establishes the: A) entity to which local securities laws apply when they exceed the GIPS requirements. B)set of portfolios that must be included in at least one of a firm's composites. C) boundaries for what is included when measuring the total firm's assets. When a firm claims compliance with GIPS, it must be compliant on a firm-wide basis. The definition of the "firm" under the GIPS standards establishes the boundaries for what constitutes firm assets, and the set of portfolios that must be included in at least one composite. A

#10

Which of the following statements is most accurate with regard to Global Investment Performance Standards (GIPS)? A) GIPS are ethical principles that firms can follow voluntarily where local or country-specific law, regulation, or industry standards may not exist for investment performance presentation. B) Firms that adopt GIPS must initially show GIPS-compliant history for a minimum of ten years, or since inception of the firm or composite if in existence less than ten years. C) GIPS 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 standards: (1) do not require managers to include non-fee-paying accounts in composites, and (2) require five years (or since inception) of GIPS compliant history in a firm's initial GIPS-compliant performance presentation. A

#4

Which of the following statements regarding Global Investment Performance Standards (GIPS) is most accurate? A) GIPS exists as a best or maximum worldwide standard where local or country specific law for investment performance measurement does not exist. B) GIPS requires that all fee-paying discretionary portfolios be included in composites defined according to investment objective or similar strategy and firms must show GIPS compliant history for a minimum of five years or since inception if a composite has existed less than five years. C) GIPS is intended to foster the notion of a world-wide regulatory body to oversee investment performance and measurement on a global scale. GIPS provides a minimum, not a maximum, standard for investment performance measurement and/or presentation. GIPS requires that all fee-paying discretionary portfolios be included in a composite, not rank ordered, to prevent firms from presenting the results of their best portfolios. GIPS is intended to foster the notion of self-regulation, not a world-wide regulatory body, to oversee investment performance and measurement. B

#9

Within the Global Investment Performance Standards (GIPS) are supplemental provisions which must be applied to which of the following asset classes? A) Emerging markets and private equity. B) Private equity and real estate. C) Alternative investments and derivatives. The GIPS standards do not address performance measurement or coverage of all asset classes, but sections 6, 7 and 8 are supplemental provisions which must be specifically applied to private equity, real estate, and wrap fee/separately managed account (SMA) portfolios. B

#2

he nine major sections of the Global Investment Performance Standards (GIPS) least likely include: A) required disclosures. B) verification procedures. C) input data requirements. The nine major sections of GIPS are: 0) Fundamentals of compliance; 1) Input data; 2) Calculation methodology; 3) Composite construction; 4) Disclosures; 5) Presentation and reporting; 6) Real estate; 7) Private equity; 8) Wrap fee/Separately Managed Account (SMA) portfolios. B