Complying with the Global Investment Performance Standards (GIPS)

Preface xiii

Acknowledgments xv

Introduction xvii

PART ONE: Explanation of the GIPS Standards

CHAPTER 1. Fundamentals of Compliance 3

Scope of the GIPS Standards 3

History of the GIPS Standards 4

Governance of the GIPS Standards 5

Organization of the GIPS Standards 7

Fundamentals of Compliance 8

Summary 12

CHAPTER 2. Defining the Firm and Composites 13

Defining the Firm 13

Defining Composites 23

Summary 50

PART TWO: The Methodology for Calculating Returns

CHAPTER 3. Portfolio Return Measurement 53

Single Period Rate of Return 54

Time Value of Money 63

Performance of the Investor: Money Weighted Returns 67

Internal Rate of Return 71

Performance of the Investment Manager: Time Weighted Returns 77

Portfolio Return Calculations for the GIPS Standards 82

Summary 90

CHAPTER 4. Composite Return Measurement 91

Composite Constituents 91

Composite Returns 93

Single Period Composite Return Considerations 97

Multi-period Composite Returns 100

Summary 107

CHAPTER 5. Dispersion and Risk Measurement 109

Internal Dispersion 109

Equal Weighted Dispersion 111

Asset Weighted Dispersion 114

Risk 119

Summary 137

PART THREE: Reporting and Maintaining Compliance with the GIPS Standards

CHAPTER 6. Disclosing and Advertising Composite Performance 141

Required Numerical Information 141

Required Disclosures 149

Length of Time for Disclosures 168

Presentation and Disclosure Recommendations 168

Supplemental Information 170

GIPS Advertising Guidelines 171

Summary 177

CHAPTER 7. Wrap-Fee/SMA, Private Equity, and Real Estate 179

Wrap-Fee/Separately Managed Accounts 180

Private Equity 188

Real Estate 198

Summary 203

CHAPTER 8. Maintaining Compliance with the GIPS Standards 205

Organization and Oversight 205

Return Calculation 211

Error Correction 215

Managing Composites and Presentations 220

Summary 226

CHAPTER 9. Verification 227

Verification 228

Performance Examinations 229

Verification Considerations 230

Required Verification Procedures 234

The Verifier’s Report 241

Preparing for Verification 241

Summary 245

Index 247