mwvt9 Wrote: ------------------------------------------------------- > mwvt9 Wrote: > -------------------------------------------------- > ----- > > McLeod81 Wrote: > > > -------------------------------------------------- > > > ----- > > > > > > I made a spreadsheet with the chronology of > the > > > GIPS change dates: > > > > > > > Why is this our life? > > > > > >This is the path we’ve chosen… now we have to > live with that choice. > > No we don’t. I could just stop. > > > > > > I mean I could…but I can’t. ; ) Then stop now. You will have to explain you grand children why you never complet your CFA 
You are a quiter. You will sgut your mounth and never tell them again “You can do it” Am i crazy or not?
Does anyone think recommendations will show up anywhere? Its taking up a lot of hard drive
tibwa Wrote: ------------------------------------------------------ > Am i crazy or not? Based on your posts you are certifiable.
It’s completely meaningless to memorize these materials just for the exam ! We shall request CFAI to provide these provisions on the exam if they are required for answering some questions. I think that most of CFAI’s staff and the existing CFA charterholders can not remember these provisions at all. It is just a waste of candidates’ time !
A friend of mine passed the below. Hope it might help: GIPS REQUIREMENTS A. INPUT DATA 1. All data and information necessary to support a firm¡¦s performance presentation and to perform the required calculations must be captured and maintained. 2. Portfolio valuations must be based on market values (not cost basis or book values). 3. Portfolios must be valued at least quarterly. For periods beginning Jan 1, 2001, portfolios must be valued at least monthly. For periods beginning Jan 1, 2010, it is anticipated that firms will be required to value portfolios on the date of any external cash flow. 4. Firms must use trade-date accounting for periods beginning Jan 1, 2005. 5. Accrual accounting must be used for fixed-income securities and all other assets that accrue interest income. 6. Accrual accounting must be used for dividends for periods beginning Jan 1, 2005. ________________________________________ B. CALCULATION METHODOLOGY 1. Total return, including realized & unrealized gains plus income, must be used. 2. Time-weighted rates of return that adjust for cash flows must be used. Periodic returns must be geometrically linked. Time-weighted rates of return that adjust for daily-weighted cash flows must be used for periods beginning Jan 1, 2005. Actual valuations at the time of external cash flows will likely be required for periods beginning Jan 1, 2010. 3. In both the numerator and the denominator, the market values of fixed-income securities must include accrued income. 4. Composite returns must be asset weighted using beginning-of-period weighting or another method that reflects both beginning market value and cash flows. 5. Cash and cash equivalents returns must be include in portfolios¡¦ total return calculations… 6. Performance must be calculated after the deduction of trading expenses. 7. If a firm sets a minimum asset level for portfolios to be included in a composite, no portfolios below that asset level may be included in the composite. ________________________________________ C. COMPOSITE CONSTRUCTION 1. All actual fee-paying discretionary portfolios must be included in at least one composite. 2. Composites must be defined according to similar investment objectives and /or strategies 3. Composites must include new portfolios on a timely and consistent basis after the portfolio comes under management ¡V unless specifically mandated by the client. 4. Terminated portfolios must be included in the historical record of appropriate composites up through the last full measurement period. 5. Portfolios must not be switched from one composite to another, unless client guidelines are changed, or composites redefined. The historical record of the portfolio must remain with the appropriate composites. 6. Convertible and other hybrid securities must be treated consistently across time and within composites. 7. Carve-out returns excluding cash cannot be used to create 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. 8. No simulations of performance ¡V Composites must include only assets under management and may not link simulated or model portfolios with actual performance. ________________________________________ D. DISCLOSURES 1. Definition of ¡§firm¡¨ used to determine the firm¡¦s total assets and firm-wide compliance. 2. Total firm assets for each period. 3. Availability of complete list and description of the firms¡¦ composites. 4. If settlement-date valuation is used by the firm. 5. The minimum asset level, if any, below which portfolios are not included in a composite. 6. The currency used to express performance. 7. The presence, use and extent of leverage or derivatives, including a description of the use, frequency, and characteristics of the instruments sufficient to identify risk. 8. Gross or net of Management fees ¡V whether performance results are calculated gross or net of investment management fees and other client paid fees. 9. Withholding Tax ¡V Relevant details of the treatment of withholding tax on dividends, interest income, and capital gains. If using indexes that are net of taxes, firms must disclose the tax basis of the composite vs that of the benchmark. 10. For composites managed against specific benchmarks, the percentage of the composites invested in countries or regions not included in the benchmark. 11. Any known inconsistencies between the chosen source of exchange rates and those of the benchmark must be described and presented. 12. Inclusion of any non-fee-paying portfolios and the percentage of composite assets that are non-fee paying portfolios… 13. Whether the presentation conforms with local laws and regulations that differ from GIPS requirements and the manner in which the local standards conflict with GIPS. 14. For any performance presented for periods prior to 1 Jan 2000, that does not comply with GIPS, the period of non-compliance and how the presentation is not in compliance with GIPS. 15. When a single asset class is carved out of a multiple asset portfolio and the returns are presented as part of single asset composite, the method used to allocate cash to the carve-out returns. ________________________________________ E. PRESENTATION AND REPORTING 1. The following items must be reported: a) At least 5 yrs of annual return data (or a record for the period since firm inception, if inception is less than 5yrs), that is GIPS-compliant. After presenting 5yrs of performance, firms must present additional annual performance up to 10yrs. b) Annual returns for all yrs. c) The number of portfolios, the amount of assets in the composite, and the percentage of the firm¡¦s total assets represented by the composite at the end of each period. d) A measure of the dispersion of individual component portfolio returns around the aggregate composite return. e) The standard Compliance Statement indicating firmwide compliance with GIPS. e.g. [Insert name of firm] has prepared and presented this report in compliance with the Global Investment Performance Standards (GIPS„µ) f) The composite creation date must be listed. 2. Firms may link non-GIPS compliance performance to their compliance history as long as firms meet the disclosure requirements of Section 4 and no non-compliant performance is presented for period after 1 Jan 2000. 3. Performance for periods of less than 1 yr must NOT be annualized. 4. Performance results of a past firm or affiliation can only be linked to or used to represent the historical record of a new firm or new affiliation if: a change only in firm ownership or name occurs, or the firm has all of the supporting performance records to calculate the performance, substantially all the assets included in the composite transfer to the new firm, and the investment decision-making process remains substantially unchanged. 5. If complaint 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. 6. If a composite is formed using single asset carve-outs from multiple asset class composites, the presentation must include a list of the underlying composites from which the carve-out was drawn and the percentage of each composite the carve-out represents. 7. The total return for the benchmark that reflects the investment strategy or mandate represented by the composite must be presented for the same period for which the composite return is presented. If a benchmark is changed, when and why must be presented. WHY GIPS WERE CREATED? „« The GIPS standards were created to provide a minimum standard for creation and presentation of comparable performance numbers of any compliant investment management firm regardless of the geographic location of the firm or the prospective client. ________________________________________ OBJECTIVES OF GIPS (p.14, GIPS Handbook) 1. To obtain worldwide acceptance of a standard of the calculation and presentation of investment performance in a fair, comparable format that provides full disclosure. 2. To ensure accurate and consistent investment performance data for reporting, record keeping, marketing, and presentation. 3. To promote fair, global competition among investment firms for all markets without creating barriers to entry for new firms. 4. To foster the notion of industry self-regulation on a global basis. ________________________________________ PARTIES AFFECTED BY GIPS (p.4, GIPS Handbook) „« The GIPS standards have 2 constituencies: A) Investment management firms, and B) Their clients and prospective clients. „« Investment firms claiming GIPS compliance provide investors with assurance that performance is reported completely and fairly. Prospective clients will have a greater level of confidence in the integrity of performance presentations prepared by compliant firms. Current clients attempting to evaluate their managers¡¦ performance also benefit by being able to compare their actual results to the firm¡¦s analogous product ¡§average¡¨ as defined by the Standards. ________________________________________ COUNTRY VERSIONS OF GIPS „« AIMR established the Investment Performance Council (IPC) in 2000, with the primary objective of having all countries adopt the GIPS as the standard for investment firms seeking to present historical investment performance. Recognizing that local regulations and well established practices will call for many countries to adopt requirements beyond those specified by the GIPS; the IPS adopted a Country Version of GIPS (CVG) approach. „« Under the CVG approach, countries with existing standards may adopt the GIPS as their core standard, and supplement this core with local requirements and established practices that go beyond the requirements of the GIPS. However, the differences between the CVG and the GIPS must be minimal. „« Translation of GIPS. If a country does not wish to adopt the English version of the GIPS, they may translate it into the local language and adopt a Translation of GIPS (TG) to improve local acceptance of the standards. Prior to the IPS¡¦s endorsement, TG submissions are scrutinized to assure that nothing in the original version of the GIPS is lost in the translation. If a discrepancy arises between the different versions of standards, the English version of GIPS is controlling. ________________________________________ DEFINITION OF FIRM (p.32, GIPS Handbook) The definition of a firm is the foundation for firm-wide compliance and creates defined boundaries for firm assets and the universe of ¡§all¡¨ portfolios that must be included in at least one composite. Guiding principle: It is recommended that firms adopt the broadest, most meaningful definition of the firm. For the purpose of complying with the GIPS standards, a firm may define itself usng one of following 3 options: 1. Defined according to Regulatory Registration - An entity registered with the appropriate national regulatory authority overseeing the entity¡¦s investment management activities. 2. Defined according to Distinct Business Entity held out to the Public - An investment firm, subsidiary, or division held out to clients or potential clients as a distinct business unit. 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. 3. Defined according to Base Currency - All assets managed to one or more base currencies. (After Jan 1 2005, firm will no longer be able to be defined by base currency and required to redefined according to one of the other acceptable definitions.) Sub-Advisor ¡V If a firm has discretion over the selection of the sub-advisor (i.e., can hire and / or fire), the firm must claim the sub-advisor¡¦s performance as part of its performance history and include the assets in the firm¡¦s total assets. Multiple Defined Firms ¡V If a parent company contains multiple defined firms, it is recommended that each firm within the parent company disclose a list of the other firms contained within the parent company. That is, to disclose all other related firms claiming compliance with GIPS standards (e.g. the parent organization and each of the other offices/branches/subsidiaries that are registered with the appropriate national registry as separate entities.) ________________________________________HISTORICAL PERFORMANCE RECORD In order to claim GIPS compliance, a firm has to present at least 5yrs of annual investment performance that complies with GIPS. If the firm has not been managing funds for 5yrs, the performance since the inception of the firm or composite must be presented. After 5yrs of compliant history has been achieved, it must add one year to its historical performance record every year until it is presenting 10yr performance record of GIPS compliant history. A firm may link a non-GIPS-compliant performance record to their compliant history so long as no non-compliant performance is presented for periods after Jan 1, 2000, and the firm discloses the periods of non-compliance and explains how the presentation is not in compliance with GIPS. For those firms having a longer history than 5yrs, it has 3 options to presenting its performance history for the period prior to the last 5yrs. 1. Retroactively comply for the period prior to the last 5yrs in accordance with GIPS requirements, giving the firm a 10-yr GIPS compliant performance history. 2. Not retroactively comply, but include its non-GIPS-compliant performance over the period prior to the last 5yr, along with the required last 5yrs of GIPS compliant performance results. Under this option, the firm must disclose why the non-GIPS-compliant yrs are not in compliance. 3. Present only the last 5yrs GIPS compliant performance history and ignore the prior history… ________________________________________ TIME-WEIGHTED RATES OF RETURN TWRR that adjust for Cash Flows ¡V Permitted until Jan 1, 2005 Original Dietz Method TWRR that adjust for Daily-weighted Cash Flows ¡V Required after Jan 1, 2005 Modified Dietz Method Modified IRR Method TWRR that uses actual valuations at the time of External Cash Flows ¡V Likely required beginning Jan 1, 2010 Daily Valuation Method ________________________________________ MEASURE OF THE DISPERSION OF PORTFOLIO RETURNS (p.11, GIPS Level 3 Workbook) A measure of the dispersion of individual component portfolio returns around the aggregate composite return (Presentation requirements ¡V Standard 5…A. 1 d). Internal Dispersion ¡V Internal dispersion is a measure of the range of returns for only those portfolios that are included in the composite for the entire period. Portfolios added to or removed from a composite during the period are not included in that period¡¦s calculation of internal dispersion. Which internal dispersion measures can be used? The GIPS handbook (pp.96-98) identifies acceptable methods of calculation as follows: 1. the range of annual returns 2. the high and low annual returns 3. the standard deviation of equal-weighted annual returns 4. the asset-weighted standard deviation annual returns ________________________________________ PERFORMANCE RESULTS OF A PAST FIRM OR AFFILATION (p.12, GIPS Level 3 Workbook) When a manager, group of manager, or an entire firm joins a new firm, a composite¡¦s past performance may be linked with the ongoing results of the new firm only if ALL of the following conditions are true for that composite: 1. Substantially all the investment decision makers are employed by the new firm (e.g. research dept, portfolio managers, and other relevant staff). 2. The staff and decision-making process remain intact and independent within the new firm. 3. The new firm discloses that the performance results from the old firm are linked to the performance record of the new firm. 4. The new firm has records that document and support the reported performance. In addition to the above four rules, when one firm (e.g. Firm A) joins an existing firm (Firm B), performance form one of the Firm A¡¦s composites can be linked to the ongoing results of Firm B only if the following condition exists: Substantially all the assets from Firm A¡¦s composite transfer over to Firm B. ________________________________________ COMPOSITION CONSTRUCTION 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. The firm must include all fee-paying discretionary portfolios in at least one composite. In this way, firms cannot ¡§cherry-pick¡¨ their best performing portfolios to present to prospective clients. Non-fee-paying portfolios may be included in the firm¡¦s composites; however, firms are required to disclose the percentage of composite assets represented by non-fee-paying portfolios. Minimum Asset Level - If a firm sets a minimum asset level for portfolios to be included in a composite, no portfolios below that asst level can be included in the composite. Portfolios must 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. Composite Definition Criteria ¡V Factors that significantly impact/impede the implementation of the intended investment strategy. ________________________________________ VERIFICATION (p.13, GIPS Level 3 workbook) Once a firm claims compliance with the Standards, it may voluntarily hire an independent third party to verify its claim of compliance to increase the level of confidence in the firm¡¦s claim of compliance. What is verification? The primary purpose of verification is to provide assurance that a firm claiming compliance with the GIPS standards has adhered to the GIPS standards on a firm-wide basis. Verification is performed with respect to an entire firm, not on specific composites. Verification Tests: Whether the investment firm has complied with all the composite construction requirements of the GIPS standards on a firm-wide basis, and Whether the firm¡¦s processes and procedures are designed to calculate and present performance results in compliance with the GIPS standards. Who can perform verification? Any independent third party can perform the verification. A firm cannot perform its own verification. Why should firms consider undertaking verification? Third-party verification brings creditability to a firm¡¦s claim of compliance. A verified firm may provide a prospective client with greater assurance about its claim of compliance with the GIPS standards. Additionally, a firm may improve its internal policies and procedures with regard to all aspects of complying with the GIPS standards. Is verification required? NO. Verification is not a requirement for GIPS compliance, but it is strongly recommended. Can a composite be GIPS verified? No, a composite cannot be verified. A single verification report is issued to the entire firm; GIPS verification cannot be carried out for a single composite. Separately, and following a firm-wide verification, a focused examination of a specific composite presentation may be conducted. This detailed composite testing is properly referred to as a performance audit or performance examination.
Wa ! Thanks a lot, Grey Arrow ! But I really wonder how many CFAI’s staff and CFA charterholders can remember these provisions clearly. Why should we spend so much time to memorize these provisions as we can easily refer to if necessary in practice ? I just do not understand what CFAI’s is thinking !
they are not thinking
I could understand testing fundamental concepts such as commitment to fair presentation, using high quality inputs, and specific calculation methodoloy (one not like three ones that used to be acceptable but are not acceptable ex 2007 but may be acceptable if used prior to 1999) gimme a break
Shall we request CFAI to provide us with those provisions on the exam ???