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 has prepared and presented this report in compliance with the Global Investment Performance Standards (GIPS®). 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) | Yes, since Jicu is employed by a brokerage firm he qualifies under GIPS. |
| | D) | No, since there is no mention that Jicu is incorporated he cannot qualify as a firm. |
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Answer and Explanation
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 potential clients as a distinct business entity. This means that a subsidiary or division of a firm can claim compliance with the GIPS even if the parent company is not GIPS compliant."
Whenever an investment management firm presents investment performance in compliance with GIPS, it must state how it defines itself 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 potential clients as a distinct business entity. This means that a subsidiary or division of a firm can claim compliance with the GIPS even if the parent company is not GIPS compliant."
Whenever an investment management firm presents investment performance in compliance with GIPS, it must state how it defines itself 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 potential clients as a distinct business entity. This means that a subsidiary or division of a firm can claim compliance with the GIPS even if the parent company is not GIPS compliant."
Whenever an investment management firm presents investment performance in compliance with GIPS, it must state how it defines itself 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 potential clients as a distinct business entity. This means that a subsidiary or division of a firm can claim compliance with the GIPS even if the parent company is not GIPS compliant."
Whenever an investment management firm presents investment performance in compliance with GIPS, it must state how it defines itself as a firm.
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 simulated results cannot be included with actual performance results. |
| | C) | No, because GIPS requires a minimum of ten years of performance before claiming compliance. |
| | D) | No, since a firm may not include fee-paying and non-fee paying portfolios in the same composite. |
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Answer and Explanation
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. [此贴子已经被作者于2008-9-18 14:53:18编辑过] | 
发表于 2008-9-18 14:38
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