Mesa Asset Management claims compliance with the Global Investment Performance Standards (GIPS®). Robert Flay, managing director for Mesa wants to go beyond merely complying with the standards and wants to incorporate all of the GIPS recommendations, particularly those dealing with presentation and reporting. Flay asks two of his performance analysts, Catherine Cora and Luigi Batali for suggestions as to how Mesa can incorporate the recommendations. | Cora: | Mesa is permitted to link our noncompliant annual performance data from 1996-1999 to our GIPS compliant data, as long as we meet the disclosure requirements. GIPS reporting recommendations suggest that we eliminate all non-compliant data after presenting the required 5 years of compliant historical performance.
| | Batali: | Including a measure of the standard deviation of composite returns is extra information that will provide prospective clients with information regarding the fluctuation of composite returns over time. |
After listening to their statements, Flay should: | A) | agree with Cora, but disagree with Batali. |
| | B) | agree with both Cora and Batali. |
| | C) | disagree with both Cora and Batali. |
| D) | disagree with Cora, but agree with Batali. |
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Answer and Explanation
Flay should disagree with Cora. The recommendations do not suggest eliminating non-compliant data. The recommendations suggest bringing non-compliant data that is linked with compliant data into compliance early in order to present a compliant 10-year performance history. Flay should agree with Batali. The recommendations suggest presenting relevant composite-level risk measures, such as standard deviation for the composite as a whole. Note that this standard deviation measure would be different from the internal dispersion measure that measures the standard deviation within the composite (relative to the average composite return).
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发表于 2008-9-18 15:38
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