Reading 34 Global Investment Performance Standards FinQuiz.com FinQuiz.com CFA Level III Item-set - Question Study Session 18 June 2018 Copyright © 2010-2018 FinQuiz.com All rights reserved Copying, reproduction or redistribution of this material is strictly prohibited info@finquiz.com FinQuiz.com © 2018 - All rights reserved Reading 34 Global Investment Performance Standards FinQuiz.com FinQuiz Item-set ID: 9116 Questions 1(9117) through 6(9122) relate to Reading 34 Marino Asset Advisors (MAA) Case Scenario Marino Asset Advisors (MAA) is a global firm which manages the accounts of both individuals as well as institutional clients MAA is situated in the U.S and has branches operating in Europe and the Middle East Due to the diverse needs of each client, MAA has allocated the accounts to three of its European Branches; Starkey Associates, Marino Asset Advisors’ Trust Division, and Ginseng Management The characteristics and responsibilities of each branch are provided below Starkey Associates (SA): SA is located in France and is responsible for managing individual client accounts SA maintains its own accountants, investment advisors, management and administration which are separate from the other branches including the head branch, MAA Purchases and sale decisions for individual client accounts are made in accordance with a rule which prohibits advisors from incurring losses of no more than 10% of the current market value on the purchases and sales Marino Asset Advisor’s Trust Division (MAATD) MAATD is located in Italy The division also manages individual client accounts and maintains an organizational structure which is distinct from that of the other branches including the head branch Domestic purchase and sale decisions are conducted independently by the branch’s investment advisors International trading decisions are however made in accordance with SA’s trading rule and accordingly sanctioned by the latter branch’s chief investment officer Ginseng Management (GM): GM is situated in England It is the only MAA international branch which manages institutional client accounts GM institutional clients include pension funds, endowments, life and non-life insurance firms, and foundations The fund sponsors of the pension funds, endowments and foundations dictate the investable classes and constrain the maximum allowable percentage invested in any particular security by the branch Furthermore, any investments selected by GM’s investment advisors must be approved by the fund sponsors of each client type in addition to the approval by the chief investment officer at MAA The investments for the life and non-life insurance firm portfolios are managed solely by the investment advisors at GM The chief investor officers at GM and MAA liaise with each other FinQuiz.com © 2018 - All rights reserved Reading 34 Global Investment Performance Standards FinQuiz.com during the performance evaluation period This is often necessary due to the complex nature and circumstances of both these client types In addition to the individual branches, MAA claims compliance with the GIPS standards The firm’s policies with respect to presenting and reporting investment performance information are outlined below Policy 1: Should MAA or its branches undergo any functional or structure change, it will have to apply the change retrospectively altering composite performance results for the period prior to the change Policy 2: MAA and its branches ought to be verified to further improve its reputation in the market Policy 3: The firm must maintain records capturing the calculation methodologies used and performances presented The records must be kept in electronic as well as in hard form such that it may be accessible by the relevant parties Policy 4: The firm must value its composites in accordance with the occurrence of large cash flows This valuation must be done on the last day of MAA’s corporate accounting year Policy 5: The firm must obtain valuations from an independent source, switching to another source in the event of higher valuation figure from the new source MAA’s investment purchase and sale activity for three of its individual client portfolios is provided below The corresponding trade dates have been provided as well as the composition for each client’s portfolio Exhibit Investment Purchase/Sale Activity and Portfolio Composition for MAA’s clients Individual Transaction Investment Purchase/Sale Activity Client Recording Date Portfolio Composition* January 1, 2005: MAA has purchased January 20, 2005 70% of the portfolio $0.05 million worth of Green Inc includes non-discretionary stock assets, fee-paying assets January 20, 2005: Cash for the stock purchase is paid 25% of the portfolio includes discretionary, feepaying assets 5% of the portfolio includes non-discretionary, non-fee paying assets March 15, 2004: MAA has purchased June 1, 2004 FinQuiz.com © 2018 - All rights reserved 35% of the portfolio Reading 34 Global Investment Performance Standards Individual Transaction Investment Purchase/Sale Activity Recording Date Client FinQuiz.com Portfolio Composition* $0.10 million worth of Generative Corporation stock includes non-discretionary assets, fee-paying assets June 1, 2004: Cash for the stock purchase is paid 40% of the portfolio includes discretionary, feepaying assets 25% of the portfolio includes non-discretionary, non-fee paying assets July 12, 2009: MAA has sold $0.01 million worth of venture capital firm investment July 21, 2009 July 21, 2009: Cash for the investment is received 15% of the portfolio includes non-discretionary assets, fee-paying assets 85% of the portfolio includes discretionary feepaying, assets 0% of the portfolio includes non-discretionary, non-fee paying assets *All assets included in each client’s portfolio are wholly managed by MAA and are included at fair value FinQuiz Question ID: 9117 In the context of the information provided for MAA’s European branches, which of the following branches will least likely be eligible to comply with the GIPS standards? A SA and MAATD only B MAATD only C MAATD and GM FinQuiz Question ID: 9118 Which of the following branches will most likely be eligible to comply with the GIPS standards? A SA only B GM only C MAATD and GM FinQuiz.com © 2018 - All rights reserved Reading 34 Global Investment Performance Standards FinQuiz.com FinQuiz Question ID: 9119 In the context of the MAA’s compliance policies, which of the following statements is most likely correct (assume that MAA’s policies are correctly stated in the context of the standards)? A Policies and are requirements of the GIPS standards B Policy is a recommendation; policy is a requirement C Policy is a recommendation; policy is a requirement FinQuiz Question ID: 9120 Which of the following policies if complied, will violate the GIPS standards? A and B and C 3, and FinQuiz Question ID: 9121 In the context of the trade activity information provided in the exhibit, which of the following portfolio(s) contains investments whose transaction recording date reflects a violation of the standards? A 1, and B and only C only FinQuiz Question ID: 9122 If MAA claims compliance with the standards, the total firm assets reported for each client’s portfolio, respectively is: A 25%; 40%; 85% B 95%; 75%; 100% C 100%; 100%; 100% FinQuiz.com © 2018 - All rights reserved Reading 34 Global Investment Performance Standards FinQuiz.com FinQuiz Item-set ID: 9124 Questions 7(9125) through 12(9130) relate to Reading 34 Townville Associates (TA) Case Scenario Townville Associates (TA) is a U.S investment management firm set up in Northern Morocco It is situated in a city where compliance with the Global Investment Performance Standards (GIPS) is gaining popularity TA was the first firm in the city to formally claim compliance with the standards back in 1999 Moroccan laws dictate all its investment management firms to undertake a complete verification by Aaros and Mitchell, a regulatory body which has been sanctioned by the government as the sole body authorized to issue verification reports However, the U.S laws are quite lax on this affair and instead follow the relevant GIPS guidelines In an effort to ensure it remains compliant with GIPS standards, the firm has documented its policies and procedures pertaining to performance reporting and calculation methodology Several of the policies are highlighted below Error Correction Policies: The firm does not document policies and procedures used to identify and rectify errors The treatment of external cash flows: I II III Any time an external cash flow that is more than 15% of the most recent quarter’s fair value of aggregate individual client portfolios, flows into or out of the relevant portfolio, revaluation is required These portfolios are managed by several investment managers, each with a diverse investment style For periods prior to January 1, 2005 TA assumes all cash flows occurred at the midpoint of the month and calculates returns accordingly For periods on or after January 1, 2005 inclusive of periods falling on or after January 1, 2010, TA calculates monthly returns by adjusting the returns for weighted external cash flows Portfolio Valuations: I II III TA values portfolios on the date of all large cash flows It has followed this policy from the date of its compliance Composites which contain indexed portfolios are to be valued on December 31 Composites which contain semi-active and active portfolios are to be valued on the last date of the corporate accounting year, June 30 FinQuiz.com © 2018 - All rights reserved Reading 34 Global Investment Performance Standards FinQuiz.com Other policies: I II III The firm calculates portfolio returns exclusive of the returns of cash and cash equivalents The firm reports gross of management fees Due to difficulties incurred in extracting trading expenses, the firm reports its returns net of investment management fees The firm accrues non-reclaimable withholding taxes on interest, dividends and capital gains and deducts reclaimable withholding taxes from portfolio returns The valuations and cash flow activity for Patrick Travis’s portfolio, a firm client, for the most recent month of December are provided below Exhibit Portfolio Valuations and External Cash Flow Activity for Travis’s portfolio Fair Value 30 November $25,550,000 Cash contribution December 1,250,000 Fair Value December* 27,600,000 Cash contribution 22 December 800,000 Fair Value 22 December** 27,000,000 Fair Value 31 December 28,450,000 *The Fair value includes the investment of $1,250,000 ** The Fair value includes the investment of $800,000 The cash flows occur at the end of the day and are available for investment the following day FinQuiz Question ID: 9125 In order to remain compliant with GIPS requirements and recommendations, TA is: A required to undertake verification from any independent third party B required to undertake verification from Aaros and Mitchell C recommended to undertake verification from Aaros and Mitchell FinQuiz Question ID: 9126 Which of the following statements pertaining to TA’s error correction policies is most likely correct? A It violates the GIPS standards’ requirements B It violates the GIPS standards’ recommendations C It violates neither the GIPS standards’ requirements nor recommendations FinQuiz.com © 2018 - All rights reserved Reading 34 Global Investment Performance Standards FinQuiz.com FinQuiz Question ID: 9127 Does TA’s treatment of its external cash flows violate the requirements and recommendations of the GIPS standards? A No B Yes with respect to I and III C Yes with respect to III FinQuiz Question ID: 9128 10 The firm’s portfolio valuation policy is most likely: A consistent with the requirements and recommendations of the standards B inconsistent with the requirements and recommendations of the standards with respect to II and III only C inconsistent with the requirements and recommendations of the standards FinQuiz Question ID: 9129 11 Which of the firm’s ‘other policies’ least likely comply with the requirements and recommendations of the standards? A I and II B I only C I, II and III FinQuiz Question ID: 9130 12 Using the information for Travis’s portfolio provided in the exhibit, the return for the client’s portfolio under the Modified Dietz method is closest to: A 11.35% B 3.17% C 3.08% FinQuiz.com © 2018 - All rights reserved Reading 34 Global Investment Performance Standards FinQuiz.com FinQuiz Item-set ID: 9142 Questions 13(9143) through 18(9148) relate to Reading 34 Bedrock Investment Associates (BIA) Case Scenario Bedrock Investment Associates (BIA) is a U.S based investment management firm managing individual client portfolios The firm claims compliance with the Global Investment Performance Standards and is yet to be verified BIA is currently evaluating the sources from which it may undertake verification Keene Gerard, CFA is a senior consultant serving the firm who has helped the firm in its transition to full compliance Gerard has identified three potential sources which the firm may use in the verification process By utilizing any of these three sources, he states, the firm will be able to fulfill the standards’ requirements and recommendations pertaining to verification Source 1: Horace Shaw, a management consultant, who had served BIA for over fifteen years, has established his own consultancy firm and is a potential candidate Source 2: Denise Advisors is a legal and regulatory advisory firm providing a variety of legal advice to firms and is a potential candidate Source 3: H.M & S is an external audit firm providing a variety of audit services to BIA The audit firm has been selected as a potential candidate The firm has recently hired a new investment manager The manager had previously worked for a competing asset management firm and specializes in derivatives The firm has not previously used derivatives for any of its clients’ portfolios It would like to evaluate the implication of the introduction of such an investment strategy In order to familiarize the manager with firm compliance policies, Gerard introduces the manager to several of the firm’s policies pertaining to its composites Policy 1: The firm calculates the composite returns by asset weighting individual portfolio returns on a monthly basis since the firm’s inception Policy 2: The firm sets a 10% tolerance limit for portfolios over which the firm has little or no discretion If more than 10% of the portfolio assets are allocated to high P/E company stocks, the portfolio is defined as non-discretionary and prospectively removed from the composite at the start of the next performance measurement period Policy 3: The firm occasionally constructs emerging market equity portfolios using a simulation method The lack of data availability on emerging markets implies that the firm simulates the available security prices to establish an estimate of FinQuiz.com © 2018 - All rights reserved Reading 34 Global Investment Performance Standards FinQuiz.com historical equity prices These portfolios are aggregated as part of the ‘Emerging Market composite’ Gerard also introduces the new manager to three investment managers currently serving the firm The details of these managers are summarized in the exhibit below Exhibit BIA’s Investment Manager Styles for managers A, B and C Investment Manager A B C Investment Style A specializes in low dividend yield stocks and low price-to-book value stocks B passively invests in large cap-blended index funds C specializes in investing in companies emerging from reorganization The Asian-Pacific Fund is a composite managed by the firm The composite includes four portfolios The relevant performance information for the composite is provided below for the month of March along with the external cash flow activity for each portfolio Exhibit: Performance Information and Cash Flow Activity for the Asian-Pacific Fund Cash Flow Weighting Factor Beginning assets (28 February) Portfolio ($ Thousands) A B C D Total 134.60 99.23 113.22 110.10 457.15 5.00 10.00 12.50 27.50 External cash flows: March 0.97 March 0.77 2.55 – 9.90 – 7.35 12 March 0.61 14.44 – 4.50 9.94 17 March 0.45 – 19.45 – 1.45 – 33.40 22 March 0.29 – 6.53 8.80 2.27 27 March 0.13 Ending Assets (31 March) –12.50 – 8.50 128.53 119.21 FinQuiz.com © 2018 - All rights reserved – 8.50 88.00 116.25 451.99 Reading 34 Global Investment Performance Standards FinQuiz.com FinQuiz Question ID: 9143 13 Based on the sources identified by Gerard, which of the following source(s) can the firm use to undertake verification in accordance with requirements and recommendations of the standards? A 1, and B and C only FinQuiz Question ID: 9144 14 The most appropriate treatment of the new investment manager’s investment style is: A creating a separate composite for the assets to be managed by the new investment manager B segregating and allocating the assets (to be managed) to existing composites based on the asset categories C creating a miscellaneous composite for the potential assets to be managed by the new manager FinQuiz Question ID: 9145 15 In the context of the firm policies introduced to the new investment manager, policies and represent: A a compliance with the requirements and recommendations of the standards B a violation of the requirements and recommendations of the standards with respect to policy only C a violation of the requirements and recommendations of the standards FinQuiz Question ID: 9146 16 In the context of policy an increased allocation to high P/E stocks, in excess of 10% of the portfolio assets, necessitates: A removing the portfolio from the composite at the start of the next performance measurement period B retaining the portfolio as part of the composite C removing the portfolio from the composite immediately following the threshold breach FinQuiz Question ID: 9147 17 Based on the investment style information provided, to the new manager, the total number of composites required for the three managers is closest to: A B C FinQuiz.com © 2018 - All rights reserved Reading 34 Global Investment Performance Standards FinQuiz.com FinQuiz Question ID: 9148 18 The March return for the Asian-Pacific fund obtained by asset-weighting the individual monthly portfolio returns using beginning-of-period values as well as adjusting portfolio returns for daily weighted external cash flows is closest to: A – 1.13% B 0.89% C 0.93% FinQuiz.com © 2018 - All rights reserved Reading 34 Global Investment Performance Standards FinQuiz.com FinQuiz Item-set ID: 9182 Questions 19(9183) through 24(9188) relate to Reading 34 Viera Investment Ltd Case Scenario Vieira Investment Limited is an asset management firm situated in the U.S The firm manages both individual and institutional client accounts Its individual client accounts are each managed using aggressive equity strategies with portfolio investments tilted towards equity securities These client accounts are aggregated into a composite named the Aggressive Mix Composite On the other hand, the institutional client accounts, which mainly include pension funds, are less aggressively managed The institutional portfolios are split evenly between equity and fixed income investments and are aggregated into the Balanced Mix Composite The exhibit below illustrates the portfolio and benchmark information pertaining to the Aggressive Mix Composite for the Years March 1, 2005 to December 31, 2011 Exhibit: Vieira Investment Limited Aggressive Mix Composite March 1, 2005 to December 31, 2011 Year Composite Composite Composite Gross 3-Yr Std Net Return Returns Deviation (%) (%) (%) Benchmark Internal 3-Yr Std Number of Dispersion Deviation Portfolios (%) (%) Firm Assets ($M) 2005 11.3 10.7 12 – 146 2006 – 10.5 – 11.3 14 2.6 186 2007 3.3 2.7 14 5.3 175 2008 6.9 6.4 16 2.5 199 2009 – 3.6 – 4.2 22 1.4 269 2010 11.4 10.6 24 2.7 347 2011 12.2 11.3 25 1.9 398 7.4 9.1 Notes: Vieira Investment Limited claims compliance to the GIPS standards and has additionally undertaken verification Its compliance and verification statement reads as: “Vieira Investment Limited claims compliance with the Global Investment Performance Standards (GIPS) and has prepared and presented this report in compliance with the GIPS standards Vieira Investment Limited has been independently verified from periods Match 1, 2005 to FinQuiz.com © 2018 - All rights reserved Reading 34 Global Investment Performance Standards FinQuiz.com December 31, 2010 The verification report is available upon request The report assures the accuracy of the composite presentation Vieira Investment Limited invests solely in domestic U.S markets The firm is not affiliated with any parent organization and is an independent asset management firm The composite was created on March 1, 2005 The returns for 2005 have been annualized in order to provide a comparable performance with other annual performance periods presented A complete firm list of composite descriptions is available upon request Valuations are computed and presented in U.S dollars The gross of fee returns are calculated by deducting actual trading expenses from gross returns Net of fee returns are calculated by deducting a fixed investment management fee of 0.50% and a performance based fee of 0.20% Internal dispersion is calculated using a downside deviation measure for all the portfolios which were included in the composite for the entire year The three year annualized standard deviation measures the variability of composite and benchmark returns over the prior 36 month period The prior year measures (2005 to 2010) are not reported due to a lack of available benchmark and composite returns data The annualized measures are calculated using monthly returns for the composite and quarterly returns for the benchmark For periods beginning January 1, 2006 the firm has used trade-date accounting for performance measurement Prior to that, the firm was using settlement-date accounting The fixed income securities comprising the composite recognize interest income as it is earned Dividends on equity investments are accrued as of the ex-dividend date 10 The Aggressive Mix Composite and its constituent portfolios are valued on a quarterly basis for all the periods presented 11 Portfolio assets are valued using a qualified third party valuation source FinQuiz Question ID: 9183 19 Based only on the performance track record presented, can Vieira Investment Limited claim compliance to the standards? A No, it has not presented five years of GIPS compliant performance B No, it has not presented ten years of GIPS compliant performance C Yes FinQuiz Question ID: 9184 20 Based on the compliance claim and verification statement provided in note 1, the firm has: A misrepresented its compliance claim only B misrepresented its verification statement only C misrepresented both its compliance claim and verification statement FinQuiz.com © 2018 - All rights reserved Reading 34 Global Investment Performance Standards FinQuiz.com FinQuiz Question ID: 9185 21 Based on the performance data provided in the exhibit and notes, the firm has failed to comply with the standards with respect to: A performance and disclosure requirements concerning benchmarks B linking non-compliance performance to compliance performance C omitting annual percentages of firm assets included in the composite FinQuiz Question ID: 9186 22 Which of the following note pairs most likely violate the standards? A and B and C and FinQuiz Question ID: 9187 23 Are notes and in compliance with the requirements and recommendations of the standards? A No with respect to only B No with respect to only C No FinQuiz Question ID: 9188 24 In the context of valuation frequency (note 10) and valuation sources (note 11), the notes are most likely incorrect with respect to: A both the valuation source and valuation frequency B the valuation source only C the valuation frequency only FinQuiz.com © 2018 - All rights reserved Reading 34 Global Investment Performance Standards FinQuiz.com FinQuiz Item-set ID: 9219 Questions 25(9220) through 30(9225) relate to Reading 34 Able Asset Advisors (AAA) Case Scenario Able Asset Advisors (AAA) is an investment advisory firm which provides investment advisory services as well as manages the portfolios of individual and institutional clients AAA claims compliance with the Global Investment Performance Standards (GIPS) The firm is contemplating the addition of real estate and private equity funds to its clients’ portfolios The firm does not have any prior experience with such asset classes and has instructed its chief compliance, Ali Zia, to recommend some of the policies the firm will need to implement in order to demonstrate compliance with the real estate and private equity valuation provisions laid out by the GIPS standards Zia is exploring real estate and private equity investments which may not fall under the scope of the GIPS provisions pertaining to the respective asset class He lists these investments as follows: Real-estate investments: I II III Insurance company separate accounts; an interest in the private property with a portion of returns related to the performance of the underlying property; real estate securities traded on the AMEX or NYSE Private equity investments: I II III Fixed term private equity funds which place restrictions on subscriptions and redemptions; open-end funds; fund vehicles which make direct investments as opposed to investing in other fund vehicles Zia has also identified some prescriptions advocated by the provisions with which AAA will need to comply should it wish to include these asset classes to its universe of potential investments Valuation Prescription: For all the performance periods presented, private equity and real estate investments are to be valued on an annual basis using independently determined fair values The firm must conduct real estate external valuations every 12 months for periods falling prior to January 1, 2010 For periods falling on or after the mentioned date, external valuations are required on a quarterly basis Since Inception Internal Rate of Return (SI-IRR) Calculation Prescription: FinQuiz.com © 2018 - All rights reserved Reading 34 I Global Investment Performance Standards FinQuiz.com The firm must calculate the net-of-fees SI-IRRs at the end of each annual period for its real estate investments using monthly cash flows Partial year SI-IRRs are not to be annualized The firm must calculate gross-of-fees SI-IRRs at the end of each annual period for its private equity investments using quarterly cash flows Partial year SI-IRRs are not to be annualized II Disclosure Prescriptions: AAA is required to make the following disclosures for its I) real estate investments and II) private equity investments: I Real estate Investments: A the frequency of independent external valuations by credentialed property appraisers; B any period presented prior to January 1, 2008 which does not comply with the GIPS standards; C any changes to its valuation policies; D the accounting basis for portfolios in the composite II Private equity Investments: A the calculation methodology used for the benchmark; B any changes to its private equity valuation policies; C the vintage year of the composite FinQuiz Question ID: 9220 25 In the context of the real estate investments listed, which of the following investment(s) has been incorrectly identified? A I and II B II and III C I FinQuiz Question ID: 9221 26 In the context of the private equity investments listed, which of the following investment(s) has been incorrectly identified? A I B I and II C I and III FinQuiz.com © 2018 - All rights reserved Reading 34 Global Investment Performance Standards FinQuiz.com FinQuiz Question ID: 9222 27 The Valuation Prescription least likely complies with the standards’ with respect to: A the statement, “For all the performance periods presented, private equity and real estate investments are to be valued on an annual basis using independently determined fair values.” B the frequency of external valuations C both the statement as well as the frequency of external valuations FinQuiz Question ID: 9223 28 The SI-IRR calculation prescription complies with the standards’ requirements with respect to: A I B II C I and II FinQuiz Question ID: 9224 29 The real estate disclosure prescriptions most likely comply with the provisions’ requirements with respect to prescription(s): A A, C and D B A and C C A only FinQuiz Question ID: 9225 30 The private equity disclosure prescriptions most likely comply with the provisions’ requirements with respect to prescription(s): A A, B and C B A and C C B only FinQuiz.com © 2018 - All rights reserved Reading 34 Global Investment Performance Standards FinQuiz.com FinQuiz Item-set ID: 9226 Questions 31(9227) through 36(9232) relate to Reading 34 Joyce Advisory Ltd Case Scenario Joyce Advisory Limited is an asset management firm that was established during June 2001 The firm manages ten different composites each holding a different category of investments Each composite is managed by a different manager The Equity Composite is one of the composites managed by the firm The composite was created on June 1, 2006 and includes both domestic and international equity securities The compliant presentation for the composite is provided below Exhibit Compliant Presentation for the Equity Composite from January 1, 2007 to December 31, 2010 % of Custom Composite Benchmark Number Composite Internal Benchmark Yr Std Yr Std of Total Year Returns Dispersion Returns Deviation Deviation Portfolios Firm (%) (%) Assets (%) (%) (%) (%) 2007 – 10.6 11.1 22.0 2008 12.5 – 14.4 23.5 2009 2.4 3.7 4.5 28.9 2010 10.9 11.4 12 6.1 24.6 8.7 9.2 Notes: The firm would like to claim compliance for the equity composite The drafted compliance statement for the composite will read as, “The equity composite of Joyce Advisory Limited has prepared and presented the report in compliance with the Global Investment Performance Standards (GIPS) The composite has not been independently verified.” The firm has adopted the following policies with respect to the inputs used in compliant presentations: I All data and information to support the composite compliant presentation has been captured and stored in hard copy as well as in electronic form II The firm’s valuation policies and calculation methodologies are currently unavailable but will be made available on minimal charges shortly The firm uses trade data accounting and recognizes its assets and liabilities within a fortnight following the transaction date The portfolios included in the composite are valued on the date of all large cash flows from 2009 onwards Prior to that, portfolios were valued on a quarterly basis All portfolios are valued using market values FinQuiz.com © 2018 - All rights reserved Reading 34 Global Investment Performance Standards FinQuiz.com The firm calculates portfolio returns by chain linking the periodic time-weighted rates of return Returns for the 2007 period are calculated on a quarterly basis Returns for the 20082010 periods are calculated on a monthly basis The firm calculates composite returns by asset weighting the constituent portfolio returns on a monthly basis for all periods presented The method, used by the firm, incorporates beginning of period portfolio values and portfolio returns, which are calculated using a relevant return calculation methodology The firm has included non-fee paying discretionary portfolios in its composite at the beginning of 2010 Due to the vast performance difference between The Equity Composite and the benchmark, the firm has decided to adopt a different benchmark whose investment strategy matches more closely to the international/domestic security mandate of the composite FinQuiz Question ID: 9227 31 In the context of the compliant presentation illustrated in the exhibit only, the presentation violates the standards’ requirements with respect to: A the composite returns presented B the failure to include the amount of composite assets at each period end; and the failure to present cumulative benchmark returns for all periods presented C the internal dispersion measure; and annualized standard deviation of returns presented FinQuiz Question ID: 9228 32 In the context of note and the Equity Composite’s compliant presentation, the firm: A cannot claim compliance for the equity composite B can claim compliance for the equity composite C has accurately drafted the compliance statement for the equity composite FinQuiz Question ID: 9229 33 In the context of note 2, which of the following input policies violate the standards’ requirements? A I B II C I and II FinQuiz Question ID: 9230 34 Which of the following notes comprise of policies which violate the requirements and recommendations of the standards? A B and C 3, and FinQuiz.com © 2018 - All rights reserved Reading 34 Global Investment Performance Standards FinQuiz.com FinQuiz Question ID: 9231 35 Notes and most likely: A comply with the GIPS standards B comply with the GIPS standards with respect to note only C fail to comply with the GIPS standards FinQuiz Question ID: 9232 36 Does the disclosure concerning the benchmark change fully comply with the disclosure required by the standards? A Yes B No, it fails to disclose the date of benchmark change C No, it fails to disclose the description of the new benchmark as well as the date of change FinQuiz.com © 2018 - All rights reserved ... only FinQuiz. com © 2018 - All rights reserved Reading 34 Global Investment Performance Standards FinQuiz. com FinQuiz Item- set ID: 9226 Questions 31 (9227) through 36 (9 232 ) relate to Reading 34 ... 2018 - All rights reserved Reading 34 Global Investment Performance Standards FinQuiz. com FinQuiz Item- set ID: 9142 Questions 13( 91 43) through 18(9148) relate to Reading 34 Bedrock Investment Associates... only FinQuiz. com © 2018 - All rights reserved Reading 34 Global Investment Performance Standards FinQuiz. com FinQuiz Item- set ID: 9219 Questions 25(9220) through 30 (9225) relate to Reading 34