Reading 49: Global Investment ....mance Standards－LOS o equity, private, estate, Investment, standards

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CFA Institute Area 3-5, 7, 12, 14-18: Portfolio Management
Session 18: Global Investment Performance Standards
Reading 49: Global Investment Performance Standards
LOS o: Identify the types of investments that are subject to the GIPS standards for real estate and private equity.

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Which of the following investments is most likely to be covered by the real estate provisions of the GIPS?

A) Common stock of a real estate developer.

B) A commingled investment in a group of residential properties.

C) A commercial mortgage-backed security on a new office block.

D) A real estate investment trust.

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 Answer and Explanation

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.

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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) Since only part of the portfolio is comprised of real estate investment, the general provisions of the GIPS would apply to the entire portfolio.

B) Since part of the portfolio is comprised of real estate investment, the real estate provisions of the GIPS would apply to the entire portfolio.

C) 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.

D) 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.

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Answer and Explanation

With this mixed portfolio, the carve-out provisions apply. Note that only the retail property falls under the real estate GIPS provisions.

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Which GIPS provisions would apply to the following types of investments: a closed-ended private equity fund, an open-ended private equity fund, and an evergreen fund?

Closed-ended

Open-ended

Evergreen

A) Private equity General General

B) Private equity Private equity General

C) General Private equity Private equity

D) Private equity General Private equity

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Answer and Explanation

Open-ended and evergreen private equity funds are covered by the general GIPS provisions. A closed-ended private equity fund is covered by the private equity GIPS provisions.