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标题: Portfolio Management and Wealth Planning【 Reading 43】 [打印本页]

作者: Bad5shah    时间: 2012-3-24 14:27     标题: [2012 L3] Portfolio Management and Wealth Planning【Session18- Reading 43】

Which of the following lines of argument has/have been put forth to justify the establishment of the Global Investment Performance Standards (GIPS)?
A)
To enhance consistency in the use of the standards.
B)
All of these choices are correct.
C)
To increase the confidence that prospective and existing clients have in the industry.



The GIPS are needed are to enhance consistency in performance presentation for inter-country holdings, consistency in the use of standards, competition in global markets, and investor confidence.
作者: Bad5shah    时间: 2012-3-24 14:27

Which of the following lines of argument has/have been put forth to justify the establishment of the Global Investment Performance Standards (GIPS)?
A)
Both of these statements are correct.
B)
Enhancing competition in global markets.
C)
Enhancing the consistency in performance presentation for inter-country holdings.



The GIPS are needed are to enhance consistency in performance presentation for inter-country holdings, consistency in the use of standards, competition in global markets, and investor confidence.
作者: Bad5shah    时间: 2012-3-24 14:27

All of the following are reasons why the Global Investment Performance Standards (GIPS) are necessary EXCEPT to enhance:
A)
the application of global accounting standards.
B)
competition in global markets.
C)
consistency in performance presentation for inter-country holdings.



GIPS are necessary for the following reasons:
作者: Bad5shah    时间: 2012-3-24 14:28

The Global Investment Performance Standards (GIPS) are necessary for all of the following reasons EXCEPT to:
A)
enhance competition in global markets by creating a universal set of standards that places managers from all countries on an equal footing in soliciting clients.
B)
enhance investor confidence and allow investors to make more meaningful comparisons.
C)
broaden the application and acceptance of the performance presentation guidelines of foreign and domestic regulatory entities.



GIPS are necessary for the following reasons:
作者: Bad5shah    时间: 2012-3-24 14:29

The Global Investment Performance Standards (GIPS) apply to investment management firms. They are NOT intended to serve which of the following?
A)
Consultants that advise investors.
B)
Securities market regulators.
C)
Prospective clients of investment firms.



The GIPS are intended to serve potential and existing clients and consultants that advise these investors.
作者: Bad5shah    时间: 2012-3-24 14:29

All of the following are reasons why the Global Investment Performance Standards (GIPS) are necessary EXCEPT enhancing:
A)
competition in global markets.
B)
investor confidence.
C)
market efficiency.



The GIPS are necessary for the following reasons:
作者: Bad5shah    时间: 2012-3-24 14:29

Which of the following best describes the underlying principles upon which the Global Investment Performance Standards (GIPS) are based?
A)
Fair and consistent application of a global set of regulatory requirements.
B)
Uniformity and consistent application of standards for the global regulation of the securities industry.
C)
Full disclosure and fair representation of performance results.



The GIPS standards are a set of voluntary standards based on the fundamental principles of full disclosure and fair representation of performance results.
作者: Bad5shah    时间: 2012-3-24 14:29

As countries adopt the Global Investment Performance Standards (GIPS), which of the following is least likely to occur?
A)
Existing and potential clients will be able to make fair and unambiguous comparisons among investment firms.
B)
Competition in the global investment industry will be enhanced.
C)
The trend toward cross border investments will decline.



There is no reason to expect the level of international investing to decline as a result of the adoption of a global set of performance standards. If anything, international investing will become more attractive as the credibility of reported performance results improves.
作者: Bad5shah    时间: 2012-3-24 14:30

Which of the following statements most accurately describes why the Global Investment Performance Standards (GIPS) were created? To:
A)
meet the need for a single globally accepted set of investment performance presentation standards.
B)
meet the need for a single globally accepted set of regulatory guidelines among developed securities markets.
C)
provide comparability of performance results among nations for which no presentation guidelines currently exist.



Recognizing the need for one globally accepted set of investment performance presentation standards, CFA Institute sponsored and funded the Global Investment Performance Standards Committee to develop and publish a single global standard by which all firms in all countries calculate and present performance to clients and prospective clients.
作者: Bad5shah    时间: 2012-3-24 14:31

For the past fifteen years, John and Jessica Smith have had their own small financial planning company named JJS Financial in a country where financial regulation is still developing. They have a goal of bringing JJS into compliance with the Global Investment Performance Standards® (GIPS) by January 1, 2012. They begin by researching the history and philosophy of GIPS so they can better understand the requirements for GIPS compliance. As they discuss what they have learned concerning the objective of GIPS with respect to competition among financial firms such as theirs, John expresses his eagerness for the competitive edge GIPS compliance will give JJS. “Soon, those of us that are GIPS compliant will have a monopoly,” he says. Jessica counters by saying “the goal of GIPS is to promote competition, but that will probably benefit small firms like ours that are in developing countries.”
John and Jessica discuss how they should define themselves as a firm. John says that they only need to define themselves as an investment firm held out to clients or potential clients as a distinct business unit. Jessica says that they must also define themselves as being registered with the appropriate national regulatory authority overseeing the entity's investment management activities.
John and Jessica begin compiling and computing the data needed for GIPS compliance. They choose to report annual returns for all years and the cumulative returns for composites and benchmarks for all periods. In computing past returns as well as future returns, they choose to use accrual accounting for fixed income securities but not for equities. Other measures they compute are the dispersion of individual component portfolio returns around the aggregate composite return as well as the number of portfolios and amount of assets in the composite and the percentage of JJS's total assets represented by the composite at the end of each period.
As John and Jessica compile the data, they realize that they can satisfy GIPS requirements for the past five years, but they cannot do so for years prior to that. John says they can link non-GIPS-compliant performance to their compliant history as long they disclose the periods of non-compliance with an explanation of why the presentation is not GIPS compliant. Jessica says this will not be sufficient since only the previous five years will be in compliance.
Finally, they must decide on a performance compliance statement. John proposes: “In this statement, JJS Financial has used the CFA Institute® guidelines outlined in the Global Investment Performance Standards (GIPS®).”
Jessica proposes: “JJS Financial claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. JJS Financial has not been independently verified.”
As they put the finishing touches on their report, they realize that some local laws may conflict with the GIPS Standards. John says they need to compare the local laws with the GIPS Standards to make sure there are no conflicts and if there are to change their report to meet the requirements of the local laws and make full disclosure of the conflicts. Jessica disagrees and says if there is a conflict between local laws and the GIPS Standards that the GIPS Standards should be followed. In the conversation that John and Jessica had concerning the objective of GIPS with respect to competition:
A)
only John was incorrect.
B)
both are incorrect.
C)
only Jessica was incorrect.



An objective of the GIPS standards is to promote fair, global competition among investment firms for all markets without creating barriers to entry for new firms. The establishment of global standards places managers from all countries on an equal footing in soliciting clients. Managers from countries that previously had inferior standards will be taken more seriously when presenting their performance, while managers from countries with stronger standards will not be penalized when competing in markets where inferior standards prevail. (Study Session 18, LOS 43.b)

With respect to the conversation that John and Jessica had concerning how to define themselves as a firm:
A)
only Jessica is correct.
B)
only John is correct.
C)
both are correct.



Firms must be defined as: "An investment firm, subsidiary, or division held out to clients or prospective clients as a distinct business entity." (Study Session 18, LOS 43.c)

Of the choices made concerning the presentation of the data, all of the following are presentation and reporting requirements of the GIPS EXCEPT:
A)
a measure of the internal dispersion of individual component portfolio returns around the aggregate composite return.
B)
cumulative returns of the composites and the benchmark for all periods.
C)
annual returns for all years.



GIPS recommend, but do not require, presentation of cumulative returns for composites and benchmarks for all periods. All of the other choices are required by Requirement 5.A.1 (Study Session 18, LOS 43.l)

With respect to the discussion concerning the reporting of the historic performance record of the portfolios under management, whose statement is CORRECT?
A)
both are incorrect.
B)
only John is incorrect.
C)
only Jessica is incorrect.



According to Standard 5.A.3 a firm must not link non-GIPS-compliant performance to their compliant history for periods after January 1, 2000. Five years of compliance is sufficient, and after five years of compliant history has been achieved, firms must add additional years of performance each year until a 10-year performance record of GIPS-compliant history has been established. (Study Session 18, LOS 43.b)

Which of the proposed compliance statements is acceptable under GIPS?
A)
Jessica’s statement only.
B)
John’s statement only.
C)
Neither Jessica’s nor John’s statements.


Standard 4.A.1. states that once a firm has met all the requirements of the GIPS standards, the firm must disclose its compliance with the GIPS standards using one of the following compliance statements.
For firms that have not been verified:
[Insert name of firm] claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. [Insert name of firm] has not been independently verified.
For firms that are verified:
[Insert name of firm] claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. [Insert name of firm] has been independently verified for the periods [insert dates]. The verification report(s) is/are available upon request. Verification assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS standards on a firm-wide basis and (2) the firm’s policies and procedures are designed to calculate and present performance in compliance with the GIPS standards. Verification does not ensure the accuracy of any specific composite presentation.
For composites of a verified firm that have also had a performance examination:
[Insert name of firm] claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. [Insert name of firm] has been independently verified for the periods [insert dates]. Verification assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS standards on a firm-wide basis and (2) the firm’s policies and procedures are designed to calculate and present performance in compliance with the GIPS standards. The [insert name of composite] composite has been examined for the periods [insert dates]. The verification and performance examination reports are available upon request. (Study Session 18, LOS 43.k)


With respect to John and Jessica’s statements regarding comparing the local laws to the GIPS Standards:
A)
only Jessica is incorrect.
B)
only John is incorrect.
C)
John's statement is correct as long as the local laws are more strict than the GIPS Standards.



If a conflict exists between country specific laws and GIPS the standards require that firms comply with the local law or regulation and make full disclosure of the conflict. (Study Session 18, LOS 43.b)
作者: Bad5shah    时间: 2012-3-24 14:32

Which of the following is an incorrect representation of requirements needed to meet the Global Investment Performance Standards (GIPS)?
A)
A firm is required to present at least five years of annual investment performance that is in compliance with GIPS. If the firm has been in existence for less time, then the performance must be presented since inception.
B)
Dollar-weighted rates of return should be used for the return calculations.
C)
Benchmarks and composites should be created on an ex ante basis.



Time-weighted rates of return must be used for the return calculations.
作者: Bad5shah    时间: 2012-3-24 14:32

Which of the following statements about the Global Investment Performance Standards (GIPS) is CORRECT?
A)
The GIPS Executive Committee endorses translating GIPS into languages other than English.
B)
GIPS can be used by good investment management firms to create barriers to entry.
C)
GIPS allows firms to select which portfolios to include.



Countries are allowed to translate GIPS to improve local acceptance of the standards, though the English version of GIPS is the controlling version. If management firms use GIPS to create barriers to entry, then the firm has violated one of the objectives of the standard (to promote global competition). Firms are not allowed to present only the results of select (best performing) portfolios.
作者: LiquidAssets10    时间: 2012-3-24 14:33

Which of the following statements is a key characteristic of Global Investment Performance Standards (GIPS)?
A)
GIPS exist as a minimum worldwide standard where local or country-specific law, regulation, or industry standards may not exist for investment performance measurement and/or presentation.
B)
GIPS require firms to 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, (2) require five years of GIPS compliant history, and (3) require compliance with local laws when they conflict with GIPS and disclosure of the conflict.
作者: LiquidAssets10    时间: 2012-3-24 14:34

Each of the following is an objective of the Global Investment Performance Standards (GIPS) EXCEPT:
A)
to promote fair, global competition among investment firms that adopt GIPS and to create barriers to entry for new firms that do not.
B)
to foster the notion of industry self-regulation on a global basis.
C)
to obtain worldwide acceptance of a standard for the calculation and presentation of investment performance in a fair, comparable format that provides full disclosure.



GIPS Objectives:
作者: LiquidAssets10    时间: 2012-3-24 14:34

Each of the following is an objective of the Global Investment Performance Standards (GIPS) EXCEPT:
A)
to broaden the application and acceptance of the performance presentation guidelines of foreign and domestic regulatory entities.
B)
to facilitate the accurate and unambiguous presentation of investment performance results to current and prospective clients.
C)
to encourage full disclosure and fair global competition without barriers to entry.



GIPS Objectives:
作者: LiquidAssets10    时间: 2012-3-24 14:34

Each of the following is one of the objectives of the Global Investment Performance Standards (GIPS) EXCEPT:
A)
to encourage self-regulation.
B)
to obtain worldwide awareness of country-specific standards for the calculation and presentation of investment performance.
C)
to encourage full disclosure and fair global competition without barriers to entry.



GIPS Objectives:
作者: LiquidAssets10    时间: 2012-3-24 14:35

Which of the following is NOT an objective of the Global Investment Performance Standards (GIPS)?
A)
To encourage self-regulation.
B)
To encourage full disclosure and fair global competition without barriers to entry.
C)
To obtain worldwide recognition by securities regulators of a standard for the calculation and presentation of investment performance in a fair, comparable format that provides full disclosure.



GIPS applies to investment management firms and is intended to serve the existing and prospective clients of investment management firms, not regulators.
作者: LiquidAssets10    时间: 2012-3-24 14:35

Which of the following is NOT a key characteristic of the Global Investment Performance Standards (GIPS)? GIPS:
A)
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.
B)
require firms to use certain calculation and presentation methods and to make certain disclosures along with the performance record.
C)
do not address every aspect of performance measurement, valuation, attribution, or coverage of all assets.



The GIPS do not require managers to include non-fee-paying accounts in composites (Standard 3.A.1).
作者: LiquidAssets10    时间: 2012-3-24 14:36

Which of the following is NOT a key characteristic of the Global Investment Performance Standards (GIPS)? GIPS:
A)
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.
B)
require firms to use certain calculation and presentation methods and to make certain disclosures along with the performance record.
C)
do not address every aspect of performance measurement, valuation, attribution, or coverage of all assets.



The GIPS do not require managers to include non-fee-paying accounts in composites (Standard 3.A.1).
作者: LiquidAssets10    时间: 2012-3-24 14:36

Which of the following compliance statements is most acceptable under the Global Investment Performance Standards (GIPS)?
A)
[Insert name of firm] has prepared and presented this report in compliance with the Global Investment Performance Standards (GIPS®).
B)
[Insert name of firm] claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. [Insert name of firm] has not been independently verified.
C)
[Insert name of firm] has prepared and presented this report in compliance with the Global Investment Performance Standards (GIPS®) and the CFA Institute.



GIPS mandates that firms use the following compliance statement when claiming compliance with the Standards and when the firm has not been verified: [Insert name of firm] claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. [Insert name of firm] has not been independently verified.
For firms that are verified:
[Insert name of firm] claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. [Insert name of firm] has been independently verified for the periods [insert dates]. The verification report(s) is/are available upon request. Verification assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS standards on a firm-wide basis and (2) the firm’s policies and procedures are designed to calculate and present performance in compliance with the GIPS standards. Verification does not ensure the accuracy of any specific composite presentation.
For composites of a verified firm that have also had a performance examination:
[Insert name of firm] claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. [Insert name of firm] has been independently verified for the periods [insert dates]. Verification assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS standards on a firm-wide basis and (2) the firm’s policies and procedures are designed to calculate and present performance in compliance with the GIPS standards. The [insert name of composite] composite has been examined for the periods [insert dates]. The verification and performance examination reports are available upon request.
Note the registered trademark symbol (®). There is no such thing as partial compliance and CFA Institute should not be referenced.
作者: LiquidAssets10    时间: 2012-3-24 14:37

Whenever an investment management firm presents its investment performance as being in compliance with the Global Investment Performance Standards (GIPS), it must state how it defines itself as a firm. Under GIPS, a firm may define itself for the purpose of claiming GIPS compliance using any of the following options EXCEPT when:
A)
the subsidiary or division of a company claims GIPS compliance when the parent company is GIPS compliant.
B)
all assets are managed to one or more base currencies.
C)
an investment firm, subsidiary, or division is held out to clients or potential clients as a distinct business unit.



In order for an investment firm to claim GIPS compliance, GIPS must be applied on a firmwide basis. If the parent company is GIPS compliant, this does not automatically mean the divisions or subsidiaries are compliant. A division or subsidiary of a company would also have to comply with GIPS to be able to claim compliance. If an investment firm, subsidiary, or division is held out to clients or potential clients as a distinct business unit it can claim GIPS compliance even if the parent company is not compliant.
作者: LiquidAssets10    时间: 2012-3-24 14:37

PTN, Inc., is an investment consulting firm. It has used Global Investment Performance Standards (GIPS) since its inception two years ago. PTN claims to be in compliance with GIPS. Could this statement be CORRECT?
A)
No, PTN does not have a five-year compliance track record.
B)
No, consulting firms cannot be GIPS compliant.
C)
Yes, PTN does not have a five-year track record, so since inception is sufficient.



Only investment management firms may claim compliance with GIPS because they actually manage the assets for which performance is reported.
作者: LiquidAssets10    时间: 2012-3-24 14:38

Which of the following is NOT an important characteristic of how a firm defines itself? The firm definition establishes the:
A)
entity to which the GIPS standards apply when a claim of compliance is made.
B)
set of portfolios that must be included in at least one of a firm's composites.
C)
entity to which local securities laws apply when they exceed the GIPS requirements.



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.
作者: LiquidAssets10    时间: 2012-3-24 14:38

Which of the following compliance statements is mandated by the Global Investment Performance Standards (GIPS)?
A)
[Insert name of firm] has prepared and presented this report in compliance with the Global Investment Performance Standards (GIPS®).
B)
[Insert name of firm] claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. [Insert name of firm] has not been independently verified.
C)
[Insert name of firm] has prepared and presented this report in compliance with the Global Investment Performance Standards (GIPS) of the CFA Institute. CFA Institute has not been involved in the preparation or review of this presentation.



GIPS mandates that firms use one of the following compliance statements when claiming compliance with the Standards:
For firms that have not been verified:
[Insert name of firm] claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. [Insert name of firm] has not been independently verified.
For firms that are verified:
[Insert name of firm] claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. [Insert name of firm] has been independently verified for the periods [insert dates]. The verification report(s) is/are available upon request. Verification assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS standards on a firm-wide basis and (2) the firm’s policies and procedures are designed to calculate and present performance in compliance with the GIPS standards. Verification does not ensure the accuracy of any specific composite presentation.
For composites of a verified firm that have also had a performance examination:
[Insert name of firm] claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. [Insert name of firm] has been independently verified for the periods [insert dates]. Verification assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS standards on a firm-wide basis and (2) the firm’s policies and procedures are designed to calculate and present performance in compliance with the GIPS standards. The [insert name of composite] composite has been examined for the periods [insert dates]. The verification and performance examination reports are available upon request.
Note the registered trademark symbol (®).
作者: LiquidAssets10    时间: 2012-3-24 14:39

If DeLecrette Investment Management wishes to claim compliance with the Global Investment Performance Standards (GIPS®) for their annual financial report, the report must include which of the following statements?
A)
DeLecrette Investment Management has prepared and presented this report in compliance with the Global Investment Performance Standards (GIPS®).
B)
DeLecrette Investment Management has prepared and presented this report in compliance with the Global Investment Performance Standards of the CFA Institute (CFA Institute-GIPS®). The CFA Institute Global Investment Performance Standards Committee has not been involved with the preparation or review of this report.
C)
DeLecrette Investment Management claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. DeLecrette Investment Management has not been independently verified.



To claim compliance, a firm must meet all required composite, calculation, disclosure, and presentation Standards. The firm is also encouraged to comply with all recommended Standards and must comply with local laws and regulations. Firms that claim compliance to the GIPS may attach the following statement to performance presentations:
"[Insert name of firm] claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. [Insert name of firm] has not been indpendently verified."
Note that no statement about CFA Institute’s involvement with the preparation or review of the report is included.
作者: LiquidAssets10    时间: 2012-3-24 14:40

Eric Jicu, a highly successful portfolio manager of the EJ Fund, wishes to define the EJ Fund as a firm under the Global Investment Performance Standards (GIPS®) standards. Jicu is employed by National Investing Alliance (NIA), a small regional brokerage firm. Although he has disclosed this information to his superiors at NIA, he would like to disclose his compliance for marketing purposes by using his past actual performance results of five years, which included two years of simulated results. Jicu also managed several non-fee-paying portfolios that were non-discretionary under a different investment style. Since the results of these non-discretionary portfolios were highly successful, he wanted to include them into his EJ Fund composites for compliance. In his statement of compliance, Jicu wrote: "The EJ Fund claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. The EJ Fund has not been independently verified."In defining a firm, does the EJ Fund qualify as a firm under GIPS?
A)
Yes, since the EJ Fund is a separate entity it does qualify under GIPS.
B)
No, since to claim compliance NIA must be included.
C)
No, since there is no mention that Jicu is incorporated he cannot qualify as a firm.



No, the EJ Fund does not qualify as a firm for GIPS compliance. In order to claim compliance, NIA must be included. In order for an investment firm to claim GIPS compliance, the GIPS must be applied on a firmwide basis. The key here is the definition of the firm, because it establishes the boundaries for what constitutes firm assets, and the set of portfolios that must be included in at least one composite. According to the GIPS, firms must be defined as:

"An investment firm, subsidiary, or division held out to clients or prospective clients as a distinct business entity."



In constructing the historical results of the EJ Fund, is Jicu correct in his approach?
A)
Yes, because he included five years of actual performance data.
B)
No, because GIPS requires a minimum of ten years of performance before claiming compliance.
C)
No, because simulated results cannot be included with actual performance results.



Jicu is not correct because simulated results must not be included with actual performance results. Under GIPS, composites must include only assets under management and may not link simulated or model portfolios with actual performance. Simulated, back-tested, or model portfolios results do not represent the returns of actual assets under management and may not be included in composite performance results.

In constructing the composites, is Jicu correct in his approach?
A)
No, since fee-paying and non-fee-paying portfolios cannot be included in the same portfolio.
B)
No, since the fee-paying discretionary portfolios are managed under a different investment style as the non-fee-paying non-discretionary portfolios.
C)
Yes, since fee-paying and non-fee-paying portfolios can be included in the same composite as long as they have the same investment objectives.



Jicu is not correct in the construction of composites. They may not include any non-fee paying and non-discretionary portfolios in his composite because they have a different investment objective and style than the EJ Fund.  Non-fee-paying portfolios may be included in the firm’s composites, but if they are, firms are required to disclose the percentage of composite assets represented by non-fee-paying portfolios.  If the firm includes non-fee-paying portfolios in its composites, they are subject to the same rules as fee-paying portfolios.  If a portfolio’s status changes from discretionary to non-discretionary, the portfolio may not be removed from a composite retroactively. However, the portfolio may be removed on a prospective basis. Composites must include all actual fee-paying discretionary portfolios.  All actual fee-paying discretionary portfolios must be included in at least one composite.  By including all fee-paying discretionary portfolios in at least one composite, firms cannot cherry-pick their best performing portfolios to present to prospective clients.  Firms are permitted to include a portfolio in more than one composite, provided it satisfies the definition of each composite.
Firm composites must be defined according to similar investment objectives and/or strategies.  Composites should be defined such that clients are able to compare the performance of one firm to another.  Composites must be representative of the firm’s products and be consistent with the firm’s marketing strategy.  Firms are not permitted to include portfolios with different investment strategies or objectives in the same composite.  Portfolios may not be moved into and out of composites except in the case of valid, documented, client-driven changes in investment objectives or guidelines or in the case of the redefinition of the composite.

In the compliance statement, is Jicu correct is claiming compliance?
A)
No, since Jicu is not in full compliance with GIPS.
B)
No, since Jicu’s GIPS compliance statement is not written correctly.
C)
Yes, since Jicu is in compliance with GIPS.



No, Jicu may not claim compliance for the EJ Fund for all of the above reasons. A firm must be in full compliance with the GIPS in order to claim GIPS compliance. There is no such thing as partial GIPS compliance!
If the performance presentation does not meet all of the requirements of the GIPS, firms cannot claim compliance with any exceptions.
作者: LiquidAssets10    时间: 2012-3-24 14:40

Which of the following is NOT a Global Investment Performance Standards (GIPS) input data requirement?
A)
For periods beginning January 1, 2010, portfolios must be valued on the date of all large cash flows.
B)
For periods beginning January 1, 2005, firms must use settlement date accounting.
C)
Portfolio valuations must be based on fair value (not cost basis or book values).



Standard 1.A.5 states that for periods beginning January 1, 2005, firms must use trade date accounting. Standard 1.A.3 states that for periods beginning January 1, 2010, firms must value portfolios on the date of all large cash flows.
作者: LiquidAssets10    时间: 2012-3-24 14:41

Under the Global Investment Performance Standards (GIPS), for periods beginning January 1, 2001, portfolio valuation must be based on:
A)
market values and they must occur at least quarterly.
B)
cost basis and they must occur at least monthly.
C)
market values and must occur at least monthly.



GIPS require portfolio valuation to be based on market values and valuation must occur at least monthly for periods beginning January 1, 2001. For periods beginning January 1, 2010, firms must value portfolios on the date of all large external cash flows, as of the calendar month end or the last business day of the month.
作者: LiquidAssets10    时间: 2012-3-24 14:41

The Strausburg Investment Management (SIM) manages portfolios that are represented in more than 15 composites. Over the years, the exact number of portfolios under management has fluctuated between 65 and 95 due to terminations and additions. Assume that SIM is notified of the termination of a portfolio on 25 August, 2012. At the end of which of the following dates should the terminated portfolio be removed from its composite order to be compliant with the Global Investment Performance Standards (GIPS)?
A)
30 August, 2012.
B)
31 December, 2011.
C)
31 July, 2012.



GIPS Standard 3.A.6 requires terminated portfolios to be included in the historical record of the appropriate composite(s) through the last full measurement period that the portfolio was under management. Standard 1.A.3 requires that portfolios must be valued at least monthly. Thus, SIM should remove the portfolio from its composite at the end of the month preceding its termination (i.e., 31 July, 2012).
作者: LiquidAssets10    时间: 2012-3-24 14:42

Which of the following actions are recommended (not required) for claiming compliance with the Global Investment Performance Standards?
A)
Total return, including realized and unrealized gains plus income must be used.
B)
Accrual accounting should be used for dividends (as of the ex-dividend date).
C)
If a firm sets a minimum asset level for portfolios to be included in a composite, no portfolios below that level can be included in the composite.



This is a recommended action step while the remainder are required.
作者: LiquidAssets10    时间: 2012-3-24 14:42

LNJ Asset Management, Inc., would like to claim compliance with the Global Investment Performance Standards (GIPS). Which of the following statements would render LNJ ineligible for this claim?
A)
LNJ has only been in existence for four years.
B)
Portfolio valuations are on a cost basis.
C)
Prior to 2010, LNJ portfolios were not revalued on the date of large cash flows.



Portfolios are to be valued on a market value basis. Both remaining statements are consistent with GIPS.
作者: LiquidAssets10    时间: 2012-3-24 14:43

Which of the following is an important requirement of Global Investment Performance Standards (GIPS)?
A)
Dividends from equities must be accrued as of the ex-dividend date.
B)
Firms need to comply with the local laws of regulation, which supersede GIPS.
C)
Time-weighted rates of return that adjust for daily-weighted cash flows must be used beginning January 1, 2003.



Time-weighted rates of return that adjust for daily-weighted cash flows must be used beginning January 1, 2005. Dividends from equities should be accrued as of the ex-dividend date is a recommendation and not a requirement.
作者: LiquidAssets10    时间: 2012-3-24 14:43

Firm X currently claims compliance with the Global Investment Performance Standards (GIPS) but uses settlement-date accounting. Beginning January 1, 2005, what must Firm X do to remain compliant?
A)
Begin using trade-date accounting and recalculate historical performance of its composites.
B)
Nothing, there is no change in requirements.
C)
Begin using trade-date accounting.



Standard 1.A.45 requires that firms use trade-date accounting for periods beginning January 1, 2005. These firms, however, will not be required to recalculate performance results that were presented in accordance with the Standards for periods prior to January 1, 2005.
作者: LiquidAssets10    时间: 2012-3-24 14:43

All of the following are requirements of the Global Investment Performance Standards (GIPS) EXCEPT:
A)
returns from cash and cash equivalents held in portfolios must be included in total-return calculations.
B)
a firm is required to present, at minimum, ten years of annual investment performance that is compliant with GIPS.
C)
portfolios must be valued at least monthly for periods beginning January 1, 2001.



GIPS require that firm’s present, at minimum, five years (not ten) of annual investment performance that is compliant with GIPS. After a firm presents 5 years of compliant history, it must annually add each subsequent year up to a total of 10 years. Note that GIPS also require monthly valuation after January 1, 2001.
作者: LiquidAssets10    时间: 2012-3-24 14:44

Which of the following is a correct representation of requirements needed to meet the Global Investment Performance Standards (GIPS)?
A)
Total return, including realized and unrealized gains plus income must be used.
B)
All of these choices are correct.
C)
Firms must use trade-date accounting for periods beginning January 1, 2005.



All of the above requirements must be met to claim compliance with GIPS.
作者: LiquidAssets10    时间: 2012-3-24 14:44

Consider the total quarterly returns for the growth and income composite of Zest Investment Management (ZIM): Q1 = 3.20%, Q2 = 4.25%, Q3 = 3.95%, Q4 = 3.35%. What is the appropriate total annual return under the calculation methodology under the Global Investment Performance Standards (GIPS)?
A)
14.480%.
B)
14.75%.
C)
15.58%.



GIPS Standard 2.A.2 requires periodic returns to be geometrically linked. Thus, the annual return is computed as:
RAnnual = [(1 + RQ1) × (1 + RQ2) × (1 + RQ3) × (1 + RQ4)] – 1
= (1.032)(1.0425)(1.0395)(1.0335) – 1 = 15.58%
作者: LiquidAssets10    时间: 2012-3-24 14:45

The Alexo Investment Management Group manages the investments for 30 retail clients. Alexo has full discretion over the investments of these clients’ assets. At the close of each day, the excess cash in the clients’ portfolios is swept into a money market fund. Alexo does not manage the money market fund, so it does not include the cash portion of the portfolio in its total return performance calculations. Alexo discloses its treatment of cash and cash equivalents in its performance presentation.
Which of the following statements regarding Alexo’s compliance with the Global Investment Performance Standards (GIPS) is CORRECT? Alexo is:
A)
in compliance with the GIPS standards. The Standards do not require excess cash to be included in total return performance calculations unless the composite consists primarily of cash or cash equivalents.
B)
in compliance with the GIPS standards. The Standards do not require cash or cash equivalents to be included in total return performance calculations unless the portfolio manager has control over the management of the cash or cash equivalents.
C)
not in compliance with the GIPS standards. The Standards require cash to be included in total returns calculations if the portfolio manager has control over the amount of the portfolio that is allocated to cash.



GIPS Standard 2.A.4 requires the returns from cash and cash equivalents held in portfolios to be included in total-return calculations as long as the portfolio manager has control over the amount of the portfolio that is allocated to cash. This requirement stands even if the manager does not actually control the investment of the cash, as is the case when it is held in a money market sweep account.
作者: LiquidAssets10    时间: 2012-3-24 14:46

Achieving comparability among investment management firms’ performance presentations requires uniformity in methods used to calculate returns. Which of the following statements concerning Global Investment Performance Standards (GIPS) calculation methodology is least accurate?
A)
Performance must be calculated prior to the deduction of all trading expenses.
B)
In both the numerator and the denominator, the market values of fixed-income securities must include accrued income.
C)
If a firm sets a minimum asset level for portfolios to be included in a composite, no portfolios below that asset level can be included in that composite.



Performance must be calculated after the deduction of all trading expenses. (GIPS Standard 2.A.4)
作者: LiquidAssets10    时间: 2012-3-24 14:46

Which of the following statements about the Global Investment Performance Standards (GIPS) is least accurate?
A)
When returns are calculated net of taxes, only those taxes that are not later reclaimed should be included.
B)
Composites must be asset weighted using end-of-period weightings.
C)
Performance must be calculated after deducting trading costs.



Composites must be asset weighted using beginning-of-period weightings or another method that reflects both beginning market value and cash flows.
作者: LiquidAssets10    时间: 2012-3-24 14:47

Jessica Yee, a portfolio manager for the National Investing Alliance (NIA), wants to create a high yield composite portfolio for marketing purposes from several other portfolios. The portfolios to be drawn from include a high yield bond portfolio, a convertible debt portfolio, and a large cap equity growth portfolio. In the composite she did not wish to include any historical results from terminated portfolios, nor did she feel it was important to include the cash associated with these portfolios (since the cash was managed by another department of NIA). Yee believed that hedging was a very important element of her investment philosophy in these volatile markets, so she delegated this responsibility to another department within NIA, but she did not wish to include their hedging results with her composite results. Yee wants to be able to claim compliance under Global Investment Performance Standards (GIPS®). Which of the following statements describes how Yee should approach the formation of the composite?
A)
The large cap equity growth portfolio must not be included in the composite.
B)
Since the large cap equity growth portfolio is part of the overall portfolios managed by NIA it can be included in the same composite with the high yield bond and convertible debt portfolios.
C)
The high yield bond portfolio and convertible debt portfolio should be in different composites since they represent different investment objectives.



Given the investment style of the composite, the only portfolios that could appropriately be included in her composite are the high yield bond portfolio and the convertible debt portfolio. Thus, the large cap equity growth portfolio must not be included in the composite. However, the large cap equity growth portfolio may be included in its own separate composite. According to GIPS, firm composites must be defined according to similar investment objectives and/or strategies. Composites should be defined such that clients are able to compare the performance of one firm to another. Composites must be representative of the firm’s products and be consistent with the firm’s marketing strategy. Firms are not permitted to include portfolios with different investment strategies or objectives in the same composite. Portfolios may not be moved into and out of composites except in the case of valid, documented, client-driven changes in investment objectives or guidelines or in the case of the redefinition of the composite.

With respect to the exclusion of terminated portfolios, is her approach correct?
A)
Terminated portfolios are allowed to be dropped from composites when the portfolio is no longer actively managed.
B)
Yee should include the results of terminated portfolios.
C)
Yee should include the results of terminated portfolios through the date the portfolio was last managed.



Terminated portfolios must be included in the historical record of the appropriate composite(s) through the last full measurement period that the portfolio was under management. This requirement prevents the inclusion of the performance of a terminated portfolio for partial periods in a composite’s return. Also, retaining the performance of a terminated portfolio while it was still being managed to a composite’s strategy prevents survivorship bias.

Which of the following best describes the cash portfolio results with respect to the overall portfolio results?
A)
If a third party entity manages the cash component of the portfolio it is not necessary to include the cash returns in the overall portfolio results.
B)
The returns from the cash component of Yee’s portfolio must be included in the overall portfolio results.
C)
Since the cash component of the portfolio is managed by another department it is not necessary to include it in the overall portfolio results.



The returns from the cash component of her portfolio must be included in her portfolio results, even though it may be managed by another department of the firm (for GIPS compliance, the Firm must claim compliance). Cash returns must be included in portfolio total-return calculations as long as the portfolio manager has control over the amount of the portfolio that is allocated to cash. This requirement stands even if the manager does not actually control the investment of the cash, as the case is when excess cash is held in a money market account. Keep in mind that the inclusion of cash is likely to reduce portfolios experiencing positive gains.

Is Yee correct in excluding the hedging activity results with her portfolio results?
A)
Yes, since the use of hedging is negligible the hedging results need not be included in the overall portfolio results.
B)
Yes, since Yee is not actually managing the hedging activities she should not include these results into the overall portfolio results.
C)
No, given Yee’s investment philosophy, the hedging results should be included in her portfolio results.



Since hedging is an important part of her investment activity, the hedging results must also be included in her portfolio results in order to be GIPS compliant. Such results are considered to be carve-out returns and may not be included in a separate composite. According to GIPS, carve-out returns excluding cash cannot be used to create a stand-alone composite. When a single asset class is carved out of a multiple-asset portfolio and the returns are presented as part of a single-asset composite, cash must be allocated to the carve-out returns and the allocation method must be disclosed. Beginning January 1, 2010, carve-out returns must not be included in single asset class composite returns unless the carve-outs are actually managed separately with their own cash allocations.
作者: LiquidAssets10    时间: 2012-3-24 14:47

The investment management firm of Rakes, Finch, and Weeks (RFW) manages several fee-paying portfolios to a long-short strategy. RFW does not ever intend to market this strategy, so they do not include the performance of these portfolios in any of the firm’s composites. Which of the following statements indicates what RFW must do if it intends to claim compliance with the Global Investment Performance Standards (GIPS)? RFW must:
A)
disclose the fact that the long-short portfolios are not included in any of the firm's composites.
B)
include the long-short portfolios in a composite of portfolios managed to a strategy that the firm does not intend to market.
C)
include the long-short portfolios in at least one of the firm's composites.



GIPS Standard 3.A.1 requires that all actual fee-paying discretionary portfolios are included in at least one composite. It is irrelevant whether or not the firm ever plans to market a particular strategy to which a portfolio is being managed. If the portfolio is fee-paying and discretionary, it must be included in a composite.
作者: cross-ied    时间: 2012-3-24 14:48

Which of the following statements is the best description of whether a portfolio should be included in a composite?
A)
All actual, fee-paying portfolios should be included in a composite.
B)
All discretionary portfolios must be included in a composite.
C)
Non-fee-paying portfolios may be included in a composite if they are discretionary.



All actual, fee-paying, discretionary portfolios must be included in at least one composite. Non-fee-paying discretionary portfolios may be included in a composite, but non-discretionary portfolios may not be included.
作者: cross-ied    时间: 2012-3-24 14:49

Which of the following portfolios is least likely to be included in a composite described as “U.S. Equity composite”? A portfolio:
A)
of U.S. equities that must hold at least 20% in cash.
B)
consisting mostly of U.S. equities that is already included in the same manager’s “Global Equity composite”.
C)
of U.S. equities that may not diverge from the S&P 500 index performance by more than 100 basis points per year.



A very limited tracking error is likely to remove the discretion from a portfolio, preventing it from being included in a composite. A portfolio may be in two composites provided it falls under both composite descriptions.
作者: cross-ied    时间: 2012-3-24 14:49

A portfolio changes from being discretionary to being non-discretionary. What action should the manager take with respect to composite construction and calculation?
A)
The manager may leave the portfolio in the calculation of historic performance but may remove the portfolio from future calculations.
B)
The manager must remove the portfolio from the composite, including the historic performance.
C)
The manager must leave the portfolio in the calculation of historic performance but must remove the portfolio from future calculations.



Historic performance cannot be adjusted by removing the portfolio. However, once a portfolio becomes non-discretionary, it may no longer be included prospectively.
作者: cross-ied    时间: 2012-3-24 14:49

Jessica French is an individual investment advisor with 200 clients and claims she conforms to Global Investment Performance Standards (GIPS). French includes all of the clients on her books. One of those clients is her father, to whom she charges no fee. However, she manages that portfolio using the same processes as she uses for her paying clients. Another client included in the composite is John Randolph, a wealthy entrepreneur. Randolph is the only client who does not give her discretion over the assets and makes every decision himself, getting suggestions from French and using her to implement decisions. French:
A)
conforms to GIPS, if disclosures are made about the non-fee-paying account.
B)
has violated GIPS because it includes her father's account, but not because it includes Randolph's account.
C)
has violated GIPS because it includes Randolph's account, but not because it includes her father's account.



Non-fee-paying clients can be included in the same composite as fee-paying clients as long as it is disclosed. Nondiscretionary clients should not be included in the composite as the clients would not adhere to the investment strategy used by the investment advisor.
作者: cross-ied    时间: 2012-3-24 14:50

McGregor Investment Management promotes itself as a fixed-income investment management firm. The vast majority of the 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?
A)
No, because the firm does not normally manage portfolios to a growth equity strategy and is not planning to promote it.
B)
Yes, because the portfolios are managed to a widely recognized investment strategy.
C)
Yes, because the portfolios are discretionary and fee paying.



The GIPS Standards require that all actual fee-paying discretionary portfolios are included in at least one composite. It does not matter if the firm ever plans to promote the particular strategy to which a portfolio is being managed, if the portfolio is fee-paying and discretionary, it must be included in at least one composite. Thus, McGregor must include the growth equity portfolios in at least one of its composites.
作者: cross-ied    时间: 2012-3-24 14:50

A composite is an aggregation of discretionary portfolios into a single group that represents a particular investment objective or strategy. Composites are the primary vehicle for presenting performance to a prospective client. Which of the following statements concerning composites is least accurate?
A)
Portfolios may not be switched from one composite to another.
B)
All actual fee-paying discretionary portfolios must be included in at least one composite.
C)
Firm composites must be defined according to similar investment objectives and/or strategies.



Portfolios may be switched from one composite to another if documented changes to a portfolio's investment mandate, objective, strategy, or redefinition of the composite make switching appropriate.
作者: cross-ied    时间: 2012-3-24 14:51

Which of the following statements best describes possible investment strategies of a firm’s composites?
A)
Strategies should be as fully defined as possible so that portfolios within the composites closely match each other.
B)
Strategies should avoid having too many qualifiers to prevent the manager from having a large number of small composites.
C)
The strategies should not overlap, so as to prevent portfolios falling under multiple composite descriptions.



Strategies may overlap, and portfolios may fall under two descriptions. Strategies should have a suitable number of qualifiers (such as sector, style, benchmark or capitalization) – having too many qualifiers results in a large number of composites each containing too few portfolios; having too few qualifiers results in composites that are too broad.
作者: cross-ied    时间: 2012-3-24 14:52

Which of the following descriptions are appropriate qualifiers for a composite?
"Small Cap""High Duration""Above €10 million"
A)
AppropriateAppropriateNot appropriate
B)
AppropriateNot appropriateAppropriate
C)
AppropriateAppropriateAppropriate



All three qualifiers are appropriate for a composite. Note that each composite should have sufficient qualifiers to make it meaningful, but not too many so as to avoid fragmentation of portfolios.
作者: cross-ied    时间: 2012-3-24 14:52

Which of the following reasons is least likely to explain why a portfolio has been moved from one composite to another?
A)
The firm has redefined the composite, and the portfolio no longer falls under the new definition.
B)
The portfolio size has grown above £5 million and is more suitable to the “UK Equities above £5 million” composite than the “UK Equities below £5 million” composite.
C)
The portfolio size has recently fallen below the minimum threshold specified for the “Japanese Value Equities above ¥500 million” composite.



All of the suggestions could be valid reasons for moving a portfolio into or out from a composite. However, if a portfolio falls below a specified minimum and the drop is not likely to be permanent, then the portfolio may remain in that composite in the short-term.
作者: cross-ied    时间: 2012-3-24 14:52

Teaton Investment Management (TIM) has recently developed a proprietary prediction model. To test the model, TIM created a returns history for an equity value portfolio using hypothetical assets and a back-tested asset allocation strategy. TIM intends to include the simulated portfolio results in its performance presentation. Which of the following most accurately describes TIM’s compliance with the Global Investment Performance Standards (GIPS)? (Assume that TIM is GIPS-compliant in all other areas). TIM is:
A)
GIPS-compliant as long as it discloses the inclusion of simulated returns in its performance presentation.
B)
GIPS-compliant if it includes the simulated portfolio in a composite that consists solely of simulated portfolios.
C)
not GIPS-compliant because the standards do not permit the inclusion of simulated portfolio results in performance presentations.



A firm may not include model performance results in its presentation and claim compliance with GIPS. Under GIPS Standard 3.A.2, composites must include only assets under management and under Standard 3.A.3 firms may not link simulated or model portfolios with actual performance. Simulated, back-tested, or model portfolio results do not represent the returns of actual assets under management and, thus, may not be included in composites performance results.
作者: cross-ied    时间: 2012-3-24 14:53

Which of the following is NOT a composite construction requirement under the Global Investment Performance Standards (GIPS)?
A)
Firms must disclose the use of simulated or model portfolio results.
B)
Firm composites must be defined according to similar investment objectives and/or strategies.
C)
Carve-out returns excluding cash cannot be used to create a stand-alone composite.



Under GIPS standard 3.A.2, composites must include only assets under management and under Standard 3.A.3 firms may not link simulated or model portfolios with actual performance. Simulated, back-tested, or model portfolio results do not represent the returns of actual assets under management and, thus, may not be included in composites performance results.
作者: cross-ied    时间: 2012-3-24 14:53

Which of the following is NOT a composite construction requirement of the Global Investment Performance Standards (GIPS)?
A)
All actual fee-paying discretionary portfolios must be included in at least one composite.
B)
Composites must include new portfolios on a timely and consistent basis after each portfolio comes under management.
C)
Terminated portfolios must be removed from the historical record of the appropriate composites for all years for which they were included in the composites.



Standard 3.A.46 states that terminated portfolios must be included in the historical record of the appropriate composites up to the last full measurement period that each portfolio was under management. The inclusion of terminated portfolios in historical performance prevents survivorship bias.
作者: cross-ied    时间: 2012-3-24 14:54

Graham and Crickenburg Associates is a large money-management company. The firm has been in existence for four years, and Graham and Crickenburg Associates has two divisions which are separate legal entities. One division in the company handles all the individual client accounts and one division handles all the corporate accounts. The co-owners and chief executive officers, Charles Graham and Kevin Crickenburg, are considering the advantages of conforming to the Global Investment Standards, GIPS®. Graham thinks that it may be more cost effective to only make the individual client division GIPS compliant. Graham thinks this it is only acceptable to make one part of the firm GIPS compliant if they sign a letter of intent that they will make the entire company GIPS compliant within a year. Crickenburg says that it is not possible, because the entire company must become GIPS compliant or not at all. They resolve to investigate the issue later, and Graham and Crickenburg move on to examining the requirements for input data and calculations.
Graham and Crickenburg note that they have records concerning the returns of portfolios in both divisions going back since the firm began. The returns were calculated monthly, used accrual accounting for fixed-income assets, used accrual accounting for dividend-paying stocks, and used settlement-date prices. They have all the final returns for the portfolios in hard copy form. Most of the raw data pertaining to the returns of the assets in the portfolios and calculation methods have been lost. This was because Graham and Crickenburg threw away the hard copy of the raw data. A computer virus destroyed many of the raw data files. Graham and Crickenburg discuss the adequacy of the data for GIPS compliance. Graham says that only having the returns data is sufficient since the company had an external CPA go over the books each year. Crickenberg says that having records going back four years is sufficient.
Graham and Crickenburg Associates has a wide variety of individual clients. Some of the clients are very conservative, and some are very aggressive. Two separate clients are so conservative that, four years ago, they stipulated that their entire portfolio simply be invested equally across US Treasury strips with two, four, six and eight years to maturity. As each group matures, as the first set did two years ago, it would be rolled over into the eight years to maturity strips again. These clients put their money with Graham and Crickenburg Associates so that the company would take care of the rollover, the paperwork, and computing the tax liability. The clients pay a fee for this service.
The portfolios of the more aggressive clients were managed by Jill Laporte, CFA, for the first two years of the existence of Graham and Crickenburg Associates. The portfolios she managed had higher returns and lower standard deviations than their respective indexes for those first two years. After two years, Laporte left the firm and took a small number of the clients with her. After she left, the aggressive portfolios that had been under her management and remained with Graham and Crickenburg Associates underperformed their respective indexes.
Graham and Crickenburg Associates is an American based firm with most of its clients living or doing business in the United States. Some of the clients are foreign, however, and have the majority of their holdings in foreign assets. Graham and Crickenburg have been computing the returns of these portfolios in their respective domestic currencies. The portfolios denominated in foreign assets use foreign benchmarks, naturally, and some of the indexes used as benchmarks report returns net of taxes. Graham and Crickenburg discuss the extent of the details they must report with respect to these facts. Graham says that they must disclose the currency used to express the performance of each portfolio. Crickenburg says they do not have to disclose details concerning indexes reporting returns net of taxes. In Graham’s and Crickenburg’s discussion concerning whether to make only a portion of the company GIPS compliant, they each gave an opinion concerning the possibility of making only one division GIPS compliant and a reason supporting that opinion. With respect to both the opinion and reason:
A)
only one is correct.
B)
both are incorrect.
C)
both are correct.



Because the subdivisions are distinct business entities, the company can define each of its divisions as a separate firm for the sake of GIPS compliance. Thus, one division can be GIPS compliant while the other is not. There need not be an intent to make all divisions GIPS compliant in such an instance. (Study Session 18, LOS 43.c)

With respect to the historical input data, which of the following are impediments to Graham and Crickenburg associates becoming GIPS compliant? The returns:
A)
are calculated using settlement-day prices.
B)
are calculated monthly and on the date of all large cash flows.
C)
of the dividend-paying stocks are calculated using accrual accounting.



As of January 2005, trade-date prices must be used (Standard 1.A.5). Monthly calculations and accrual accounting for fixed-income assets is required. Accrual accounting for dividend-paying stocks is recommended. (Study Session 18, LOS 43.d)

With respect to the historical input data, the existence of only the portfolio returns data, and the fact that data only goes back four years: Graham and Crickenberg both state the data is sufficient. Graham says only having the portfolio returns is sufficient, and Crickenberg says only having four years is sufficient. With respect to these statements:
A)
only Crickenberg is incorrect.
B)
both are incorrect.
C)
only Graham is incorrect.



Graham was incorrect because the supporting data must be maintained (Standard 1.A.1). Crickenberg was correct in that the firm has only been existence for four years, so four years of data is adequate. (Study Session 18, LOS 43.d)

As described, Graham and Crickenburg Associates has two clients that have all their money in US Treasury strips. With respect to including these portfolios in a composite they:
A)
must be included in a composite of fixed income portfolios.
B)
cannot be included because they are nondiscretionary.
C)
cannot be included because fees are paid.



These two portfolios are clearly nondiscretionary, and they cannot be included in a composite (Standard 3.A.1). (Study Session 18, LOS 43.j)

With respect to Jill Laporte leaving the company two years ago, to be GIPS compliant, Graham and Crickenburg Associates:
A)
must disclose this as a significant event given her record.
B)
must disclose this because she took some of the clients with her.
C)
need not disclose this under any circumstances.



Laporte’s leaving must be reported because a star portfolio manager leaving the firm is a significant event (Standard 4.A.14). (Study Session 18, LOS 43.k)

Some portfolios hold foreign assets and use benchmarks that are net of taxes. In order to be GIPS compliant, Graham said that they must disclose details concerning the currency, but Crickenburg says they do not have disclose that some of the index returns are computed net of taxes. With respect to these statements:
A)
only one is correct.
B)
both are incorrect.
C)
both are correct.



Firms must disclose the currency used to express performance (Standard 4.A.7). Firms must disclose relevant details of the treatment of withholding tax on dividends, interest income, and capital gains. If using indices that are net of taxes, the firm must disclose if benchmark returns are net of withholding taxes if this information is available (Standard 4.A.20). (Study Session 18, LOS 43.k)
作者: cross-ied    时间: 2012-3-24 14:54

Of the following, with respect to GIPS, the one that is not a requirement and is only a recommendation is:
A)
a list of other firms contained within a parent company.
B)
how the firm defines itself to determine the total assets.
C)
a list of any composites that have been discontinued within the last five years.



Standard 4.B.5: The Standards make the recommendation that if a parent company contains multiple defined firms, each firm within the parent company should disclose a list of the other firms contained within the parent company.
Standard 4.A.2: The definition of the “firm” used to determine the firm’s total assets and firm wide compliance is a required disclosure.
Standard 0.A.10: The list must include not only all the firm’s current composites but also any that have been discontinued within the last five years.
作者: cross-ied    时间: 2012-3-24 14:55

With respect to fees and to reporting returns under GIPS, firms:
A)
can report returns either net of fees or gross of fees.
B)
must report returns gross of fees and never net of fees.
C)
must report returns net of fees and never gross of fees.



Firms can be reported either way, but they must be labeled accordingly (Standards 4.A.5 and 4.A.6).
作者: cross-ied    时间: 2012-3-24 14:55

With respect to reporting a composite’s creation date and any changes in a composite’s name, which is a requirement of GIPS?
A)
The creation date but not changes in a composite’s name.
B)
Changes in a composite’s name but not its creation date.
C)
Both the creation date and any changes in a composite’s name.



Standard 4.A.10: firms must disclose the composite creation date.
Standard 4.A.18: firms must disclose any changes in a composite’s name.
作者: cross-ied    时间: 2012-3-24 14:55

In January 2003, the Medusco Investment firm has decided to present its performance history in compliance with the Global Investment Performance Standards (GIPS). Medusco was formed on January 1, 1992, and has never before presented its performance results in compliance with the GIPS standards. Which of the following actions must Medusco take in order to claim GIPS compliance?
A)
Present GIPS-compliant performance results for the 5-year period from January 1, 1998, through December 31, 2002, and report five additional years of non-GIPS-compliant performance with a disclosure explaining why the performance in the earlier years is not GIPS-compliant.
B)
Present GIPS-compliant performance results for the 5-year period from January 1, 1998, through December 31, 2002.
C)
Retroactively comply with GIPS for periods after January 1, 2000, and report non-GIPS-compliant performance results for the periods January 1, 1993, through December 31, 1999, with a disclosure explaining why these earlier years are not GIPS-compliant.



In order to claim GIPS compliance, Medusco must present at least five years of annual investment performance results that are compliant with GIPS. Medusco may, at its discretion, add an additional five years of results that are not GIPS-compliant to their five-year compliant history with a disclosure of the period of noncompliance and an explanation of why the presentation for these periods is not GIPS compliant (Standard 4.A.15 and 5.A.1.a).
作者: cross-ied    时间: 2012-3-24 14:56

Assume that on January 1, 2005, a 15-year old firm with no Global Investment Performance Standards (GIPS) compliant performance history wishes to claim compliance with the GIPS standards. Which of the following accurately reflects the appropriate action for the firm to take?
A)
Comply with GIPS for the year beginning January 1, 2004, and report four additional years of performance history (five total) and disclose why the earlier years are not GIPS compliant.
B)
Comply with the GIPS standards for the 5-year period January 1, 2000, through December 31, 2004, and report five additional years of non-GIPS-compliant performance and disclosure of why the performance in the earlier years is not GIPS compliant.
C)
Comply with GIPS for the year beginning January 1, 2004, and report nine additional years of performance history (ten total) and disclose 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 firm may link a non-GIPS-compliant performance record to their 5-year compliant history as long as only GIPS-compliant performance is presented for periods after January 1, 2000, and the firm discloses the periods of non-compliance with an explanation of why the presentation is not GIPS compliant (Standard 4.A.15 and 5.A.1.a).
作者: cross-ied    时间: 2012-3-24 14:56

Which of the following is NOT a Global Investment Performance Standards (GIPS) presentation and reporting requirement?
A)
Performance for periods of less than one year must be annualized.
B)
A measure of the dispersion of individual component portfolio returns around the aggregate composite return.
C)
The composite creation date.



Standard 5.A.4 requires that performance for periods of less than one year must not be annualized.
作者: cross-ied    时间: 2012-3-24 14:57

Assume that on October 20, 2005, Firm X, which is in compliance with the Global Investment Performance Standards (GIPS), acquired the assets for Firm Z, which is not in compliance with the GIPS standards. Until what date may Firm X continue to claim compliance with the Standards before it must have the assets of Firm Z GIPS compliant?
A)
October 20, 2006.
B)
January 1, 2007.
C)
January 1, 2006.



Under GIPS standard 5.A.48.b, if a compliant firm acquires or is acquired by a non-compliant firm, the firms have one year to bring the non-compliant firm’s acquired assets into compliance.
作者: cross-ied    时间: 2012-3-24 14:57

Three portfolio managers left their previous employer two years ago to form Atomic Investment Management. The reason for their departure was a desire to be solely responsible for investment decisions as opposed to the consensus approach that was utilized at their old firm. Atomic wants to claim compliance with the Global Investment Performance Standards (GIPS), but does not have a 5-year minimum compliance history. Under the GIPS standards, which of the following actions may Atomic take in order to claim compliance? Atomic may:
A)
present a 2-year GIPS-compliant performance history.
B)
link three years of the managers' performance history from the previous employer to the 2-year history since Atomic's inception with a clear and unambiguous disclosure.
C)
not present its performance in compliance with the GIPS until it has established a 5-year performance history.



Atomic does not meet the test of performance portability under GIPS standard 5.A.48.a. Thus, performance results from the previous employer cannot be linked to or used to represent Atomic’s historical record. In any case, Atomic is not required to present a 5-year GIPS-compliant performance record. Since Atomic is less than five years old, it can claim compliance with GIPS by presenting a GIPS-compliant performance history for the two years since its inception.
作者: cross-ied    时间: 2012-3-24 14:58

Mesa Asset Management has claimed compliance with the Global Investment Performance Standards (GIPS®) for many years and it is now January 1, 2011. 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)
disagree with both Cora, but agree with Batali.
B)
disagree with both Cora and Batali.
C)
agree with Cora, but disagree with Batali.



Flay should disagree with both Cora and Batali. According to Standard 5.A.2. For periods beginning on or after January 1, 2011, firms must present for each annual period:
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). Recommendations for presenting relevant composite-level risk measures include: Standard 5.B.5. For each year that annualized composite and benchmark returns are reported, the corresponding annualized standard deviation of monthly returns for the composite and benchmark. Standard 5.B.6. Additional ex-post composite risk measures.
Although the recommendations do not suggest eliminating non-compliant data according to Standard 5.B.8, Firms should comply with the GIPS for all historical periods, this indicates firms should bring non-compliant data that is linked with compliant data into compliance.
作者: cross-ied    时间: 2012-3-24 14:59

Which of the following measures of portfolio dispersion is least likely to reflect an outlying portfolio?
A)
Mean absolute deviation.
B)
Standard deviation.
C)
Interquartile range.



Of the four dispersion measures, only the interquartile range ignores the values of outliers. This measure provides the value of the second and third quartiles, and is not affected by individual portfolio results within the top and bottom quartiles.
作者: cross-ied    时间: 2012-3-24 14:59

A composite contains portfolios A, B, C and D that had returns during the year of 3.8 percent, -4.6 percent, 16.1 percent and 7.4 percent respectively. Which of the following statements best describes the provisions of GIPS with respect to measures of dispersion?
A)
The standard deviation is the most appropriate measure, but the firm should disclose whether the denominator in the calculation is the number of portfolios or the number of portfolios minus one.
B)
No measure of dispersion needs to be presented.
C)
The standard deviation should be shown using either equal weightings or asset weightings.



No measures of dispersion need to be shown since the composite contains fewer than six portfolios.
作者: cross-ied    时间: 2012-3-24 15:00

Which of the following investments is most likely to be covered by the real estate provisions of the GIPS?
A)
A commercial mortgage-backed security on a new office block.
B)
A commingled investment in a group of residential properties.
C)
A real estate investment trust.



The general provisions of the GIPS would apply to REITs, any common stock, CMBSs and many private debt investments. The residential properties are the only investment listed that would fall under the real estate provisions.
作者: cross-ied    时间: 2012-3-24 15:01

A portfolio consists of three approximately equal investments: some retail property, a large commercial loan and some common stock in a construction company. Which of the following best describes how the GIPS provisions would be applied?
A)
The carve-out provisions would apply; with the retail property and the loan using the real estate GIPS provisions, and common stock using the general GIPS provisions.
B)
The carve-out provisions would apply; with the retail property using the real estate GIPS provisions, and the loan and common stock using the general GIPS provisions.
C)
Since only part of the portfolio is comprised of real estate investment, the general provisions of the GIPS would apply to the entire portfolio.



With this mixed portfolio, the carve-out provisions apply. Note that only the retail property falls under the real estate GIPS provisions.
作者: cross-ied    时间: 2012-3-24 15:01

The calculation of capital return under the GIPS provisions for real estate is performed by dividing a measure of return by capital employed. Beginning with the change in value of the real estate (and cash), how would the calculation of return account for capital expenditures, nonrecoverable expenses, and sales proceeds?
Capital ExpendituresNonrecoverable ExpensesSales Proceeds
A)
SubtractNo adjustmentAdd
B)
AddNo adjustmentSubtract
C)
SubtractSubtractAdd



Capital return is calculated by dividing a return measure by capital employed. The return measure equals the change in value during the period (i.e. ending market value less beginning market value) minus capital expenditures plus sales proceeds. Nonrecoverable expenses would be deducted from income return.
作者: cross-ied    时间: 2012-3-24 15:02

When performing the return calculations for real estate, which of the following best describes capital employed under the GIPS real estate provision?
A)
Beginning of period capital.
B)
Beginning of period capital adjusted by time-weighted cash flows.
C)
Beginning of period, end of period or a time-weighted average capital may be used, provided it is applied consistently and fully disclosed.



All return calculations must use beginning capital adjusted for time-weighted cash flows during the period.
作者: cross-ied    时间: 2012-3-24 15:03

A firm calculates income return, capital return and total return for their real estate composite using the GIPS provisions for real estate. Is it necessary for the sum of income return plus capital return to equal total return in each quarter, and the sum of the four quarterly income returns to equal the income return for the year?

Quarterly SumAnnual Sum
A)
NoYes
B)
YesYes
C)
YesNo



For each period, the total return must equal income return plus capital return. However, for the year, each component of return (i.e. income and capital) may be calculated using chain-linked time-weighted rates of return. Hence the annual return will slightly exceed the sum of the quarterly returns.
作者: cross-ied    时间: 2012-3-24 15:04

A firm calculates income return, capital return and total return for their real estate composite using the GIPS provisions for real estate. Is it necessary for the sum of income return plus capital return to equal total return in each quarter, and the sum of the four quarterly income returns to equal the income return for the year?

Quarterly SumAnnual Sum
A)
NoYes
B)
YesYes
C)
YesNo



For each period, the total return must equal income return plus capital return. However, for the year, each component of return (i.e. income and capital) may be calculated using chain-linked time-weighted rates of return. Hence the annual return will slightly exceed the sum of the quarterly returns.
作者: JustasS    时间: 2012-3-24 15:07

The GIPS provisions for private equity require the vintage year to be presented. Which of the following best describes the vintage year? The vintage year is the year in which:
A)
the first material investment was made.
B)
capital is first drawn down from investors.
C)
the composite was created.



By definition, the vintage year is the year in which capital is first called from or drawn down from investors.
作者: JustasS    时间: 2012-3-24 15:08

Which of the following ratios is least likely to be shown in a performance presentation under the GIPS provisions for private equity?
A)
Paid-in capital to committed capital.
B)
Total value to residual value.
C)
Cumulative distribution to paid-in capital.



The required ratios for presentation are: total value to paid-in capital, cumulative distributions to paid-in capital, paid-in capital to committed capital, and residual value to paid-in capital.
作者: JustasS    时间: 2012-3-24 15:08

In the presentation of a private equity fund, a firm reports an annualized since-inception (SI) internal rate of return (IRR) net-of-fees but not gross-of-fees. The net-of-fees returns are not net of carried interest. With respect to GIPS, the firm has:
A)
made an error by not reporting returns gross-of-fees but netting out carried interest is not required so that is not an error.
B)
made an error by not netting out carried interest but not by omitting returns calculated gross-of-fees.
C)
made an error by not reporting returns gross-of-fees and by not netting out carried interest.



Standard 7.A.21: The GIPS provision for private equity presentation and reporting require firms to present both the net-of-fees and the gross-of-fees annualized SI-IRR of the composite for each year since inception. Standard 7.A.46: The net-of-fees must be net of carried interest, representing the percentage of profits on the fund’s investments that general partners receive, as well as investment management fees and transaction expenses.
作者: JustasS    时间: 2012-3-24 15:09

A firm reports returns on real estate investments. The firm has not complied with GIPS by committing an omission or error if it:
A)
computes returns based on capital employed, computed by adjusting the beginning capital for time-weighted cash flows that occur during the measurement period.
B)
calculates income returns and capital returns using geometrically linked time-weighted rates of return.
C)
reports total return but not income return and capital return.



Standard 6.A.3.a requires the firm report must report total return and also the components of income and capital return.
作者: JustasS    时间: 2012-3-24 15:09

According to GIPS, when presenting performance to a prospective wrap fee sponsor, an investment manager must:
A)
disclose the names of the wrap fee sponsors when presenting sponsor-specific composites.
B)
present performance of all wrap fee accounts in the composite being presented.
C)
not link non-compliant performance that occurs before 1 January 2006 with compliant performance.



According to standard 8.A.5, when soliciting business from potential SMA/wrap fee clients, firms must provide presentations that include all SMA/wrap fee accounts managed to the stated objective or strategy.
In standard 8.A.4, sponsor-specific composite results are presented to an existing wrap fee sponsor, not a potential sponsor.
According to standard 8.A.7, firms may link non-compliant performance with compliant performance as long as the non-compliant performance pertains to periods before 1 January 2006 and only compliant data is presented for periods after 1 January 2006.
作者: JustasS    时间: 2012-3-24 15:09

Handley Asset Management (HAM), an investment management firm founded in 2000, manages wrap and other non-wrap accounts. HAM is preparing a wrap fee presentation for its small-cap value composite. The performance results in the presentation date back to 2002; however, the firm began including wrap fee portfolios in the composite in 2006. Which of the following statements is most accurate?
A)
To be compliant with GIPS, HAM must disclose each period when an actual wrap fee portfolio was not in the composite being identified.
B)
HAM’s presentation is compliant with GIPS as is and no change or disclosure is required.
C)
To be compliant with GIPS, HAM must exclude the wrap fee portfolios from its presentation results.



According to standard 8.A.2, when presenting composite returns in wrap fee/SMA compliant presentations, the firm must disclose each period in which the composite does not contain actual wrap fee portfolios.
作者: JustasS    时间: 2012-3-24 15:10

Stroud Investments is preparing a wrap fee presentation for a potential wrap fee client. According to the GIPS standards, the investment performance contained in the presentation must be:
A)
gross of fees.
B)
net the portion of wrap fees that can be directly tied to transaction expenses.
C)
net of the entire wrap fee.



According to standard 8.A.6, performance presentations to potential wrap fee clients must be net of the entire wrap fee.
作者: JustasS    时间: 2012-3-24 15:10

For private equity, valuations must be prepared:
A)
annually only, and the lack of liquidity of private equity prohibits quarterly valuations.
B)
at least annually, but quarterly valuations are recommended.
C)
at least quarterly, but monthly valuations are recommended.



Standard 7.A.2 valuations must be prepared at least annually. Standard 7.B.1 is a recommendation stating that Private Equity investments should be valued at least quarterly.
作者: JustasS    时间: 2012-3-24 15:10

A firm does not disclose the valuation hierarchy that they are employing to value an asset, but the firm is properly following GIPS valuation principles. If the valuation of the asset cannot be determined through objective and observable pricing for similar investments in active markets, which of the following should be the "next source" of a valuation estimate, in accordance with CFA Institute GIPS recommendations?
A)
Market-based input other than quoted pricing that is observable for the asset.
B)
Subjective, unobservable inputs.
C)
Quoted pricing for similar and/or identical assets in markets that are not active.



If the firm does not disclose the valuation hierarchy that they are employing and is following the GIPS valuation principles, then the firm is using the recommended GIPS valuation hierarchy. The GIPS valuation hierarchy is as follows:
Based on this hierarchy, if observed market prices from an active market are not available, the next best valuation basis is to use quoted prices from an inactive market.
作者: JustasS    时间: 2012-3-24 15:11

Which of the following is least likely a GIPS valuation requirement?
A)
Firms must disclose if their valuation hierarchy differs from the GIPS recommended hierarchy.
B)
If local laws or regulations related to valuation conflict with GIPS, firms are required to follow the more strict of the law or standard.
C)
Firms must disclose their portfolio valuation policies and hierarchy.



If local laws or regulations related to valuation conflict with GIPS, firms are required to follow the local laws or regulations and disclose the conflict. The other two answer choices are both GIPS valuation requirements.
作者: JustasS    时间: 2012-3-24 15:12

Which of the following regarding the GIPS real estate valuation principles is most accurate?
A)
Fees paid to external valuators must not be based on resulting value.
B)
The GIPS recommend that real estate investments be valued externally by outside sources.
C)
The GIPS require the reporting of a single appraisal value.



The amount of the external valuator’s fee must not be based on the resulting value. The GIPS require(not recommend) that real estate investments be valued externally by outside sources. Although appraisal standards allow reporting values in ranges, the GIPS recommend (not require) the reporting of a single value.
作者: JustasS    时间: 2012-3-24 15:12

According to the GIPS valuation principles, for periods beginning January 1, 2011, firms must:
A)
use only objective valuation methods.
B)
disclose the use of any subjective valuation inputs.
C)
disclose the use of any subjective valuation inputs if the portfolio is a significant portion of the composite.



For periods beginning on or after January 1, 2011, firms must disclose the use of any subjective valuation inputs if the portfolio valued using the subjective input represents a significant portion of the composite.
作者: JustasS    时间: 2012-3-24 15:12

Brown and Brown Associates is a money management firm that is advertising that it is GIPS compliant. In its advertisements, the statement that the firm can use in claiming compliance is:
A)
“Brown and Brown Associates has prepared and presented this report in compliance with the Global Investment Performance Standards (GIPS®)”.
B)
“CFAI confirms that Brown and Brown Associates are in compliance with the Global Investment Performance Standards (GIPS®)”.
C)
“Brown and Brown Associates claims compliance with the Global Investment Performance Standards (GIPS®)”.



The correct statement is “Brown and Brown Associates claims compliance with the Global Investment Performance Standards (GIPS®)”.
作者: JustasS    时间: 2012-3-24 15:12

White and White Associates (WWA) is a money management firm that is planning to advertise that it is GIPS compliant. In the advertisement, WWA may include performance results:
A)
and does not have to include any additional information concerning performance.
B)
only if WWA includes further information including the return of the composite's benchmark.
C)
only if there has been third-party verification.



Guideline B.7 stipulates that any advertisement that includes performance results must also include additional information such as the return of the composite's benchmark.
作者: JustasS    时间: 2012-3-24 15:13

Black and Black Associates (BBA) is a money management firm that is advertising that it is GIPS compliant. BBA actively employs derivatives and leverage, and these tools have a material affect on composite returns. With respect to describing their use of these tools in their advertisements, BBA:
A)
need not mention neither leverage nor derivatives.
B)
must do so with respect to derivatives but not leverage.
C)
must do so with respect to both derivatives and leverage.



Guideline B.11 stipulates that the use of derivatives, leverage, and short positions must be described under these conditions.
作者: JustasS    时间: 2012-3-24 15:13

A firm that is claiming GIPS compliance is considering verification. Verification:
A)
could be on select composites after the whole firm has been verified.
B)
could be on select composites as part of the firm wide verification.
C)
would include all composites as part of the firm wide verification.



As part of the verification process the firm must comply with all the composite construction requirements of GIPS on a firm-wide basis. This means that a single verification report is issued to the entire firm and that GIPS verification cannot be carried out for a single composite.
作者: JustasS    时间: 2012-3-24 15:13

As part of the verification process of a firm claiming GIPS compliance, the third party doing the verification asks for a list and description of the firm’s composites and a list of all portfolios under the firm’s management. Which of these requests is (are) actually part of the preparation process?
A)
A list of all portfolios under management but not a list and description of composites.
B)
A list and description of composites but not a list of all portfolios under management.
C)
Both asking for a list and description of composites and a list of all portfolios under management.



The verification includes both of these requests as well as many others such as a sample of performance presentations and marketing materials and all investment management agreements or contracts.
作者: JustasS    时间: 2012-3-24 15:14

The purpose of third-party verification:
A)
is required by CFA Institute but not the SEC.
B)
is required by CFA Institute and the Securities and Exchange Commission (SEC).
C)
may give a GIPS compliant firm a competitive advantage by making the claim to GIPS compliance more credible.



As of now, the only purpose of verification is to give the GIPS compliant firm a competitive edge. Prospective clients will have more confidence in the claim of GIPS compliance.
作者: JustasS    时间: 2012-3-24 15:14

A portfolio manager whose firm follows GIPS is concerned about the effect on his reported investment performance of a large client-directed withdrawal and the resulting liquidation of certain securities. What would be the best method for adjusting results for client-directed withdrawals in discretionary portfolios, in accordance with GIPS?
A)
In this situation, the portfolio should be labeled non-discretionary, and all current and historical returns should be removed from the composite results.
B)
GIPS recommend that the manager assumes a proportionate amount of each security is sold, in determining a fair tax adjustment to "add back."
C)
The manager is not permitted to add back the non-discretionary taxes in order to improve the reported composite returns.



This proportional adjustment method should be used in order to properly comply with GIPS. This method is preferred, in order to avoid the temptation to assume the security with the greatest embedded capital gain was sold, in order to improve the adjustment, and resulting reported returns.
作者: JustasS    时间: 2012-3-24 15:14

GIPS guidance for reporting after-tax returns for periods beginning on or after January 1, 2011 is most likely contained in the:
A)
country-specific guidance released by the country sponsors.
B)
GIPS standards in the provision regarding calculation methodology.
C)
GIPS standards in the section regarding GIPS valuation principles.



Since after-tax issues are highly dependent on the taxing authority for the country in which the funds are being managed, the specific guidance on the presentation of after-tax returns was removed from the GIPS standards. The responsibility now falls to the country sponsors and the guidance is to be addressed in the country-specific guidance.
作者: JustasS    时间: 2012-3-24 15:15

When adjusting after-tax returns to account for the effects of non-discretionary trades resulting from client directed withdrawals, the adjustment amount should reflect the tax effect that would result from selling:
A)
a proportionate amount of each security.
B)
the most highly appreciated securities.
C)
the securities with the least amount of appreciation.



Managers have an incentive to use the adjustment amount that reflects the tax effect from selling the most highly appreciated securities as this would result in the highest adjusted returns, but since this may allow for manipulation of reporting, it is recommended that the adjustment value reflect the sale of a proportionate amount of each security.
作者: JustasS    时间: 2012-3-24 15:15

Jonathan Goolsby, a performance-reporting analyst at Handley Asset Management (HAM), is preparing after-tax returns for inclusion in a performance presentation and needs to determine the most appropriate method to incorporate the effects of taxes on returns. HAM employs tax-aware portfolio management strategies. If Goolsby uses the mark-to-liquidation method when computing after-tax returns, the most likely effect is that returns will be:
A)
overstated.
B)
correctly stated.
C)
understated.



The mark-to-liquidation method assumes all gains, whether recognized or not, are taxed each period. Under this method, taxes will be overstated and returns will be understated for a portfolio that uses tax-aware strategies. For example, HAM may delay selling a stock that has had capital gains to delay taxes to a future period, thus increasing the returns of the portfolio. Under the mark-to-liquidation method, the returns would be calculated as if the stock had been sold and the gains realized in that period. Thus increasing taxes for that period and decreasing returns.




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