2019 CFA level 3 qbank reading 37 overview of the global investment performance standards questions

10/12/2018 Learning Management System Question #1 of 103 Handley Asset Management (HAM), an investment management rm founded in 2000, manages wrap and other non-wrap accounts HAM is preparing a wrap fee presentation for its small-cap value composite The performance results in the presentation date back to 2002; however, the rm began including wrap fee portfolios in the composite in 2006 Which of the following statements is most accurate? A) To be compliant with GIPS, HAM must disclose each period when an actual wrap fee in portfolio was not in the composite being identi ed B) To be compliant with GIPS, HAM must exclude the wrap fee portfolios from its en tre presentation results w w w o m Question #2 of 103 bo ok c C) HAM’s presentation is compliant with GIPS as is and no change or disclosure is required https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice/qbank/24038518/quiz/83448709/print 1/46 10/12/2018 Learning Management System In October of 1998, Alice Freeman, Georgeanne Pallence, and Mark Antonasanti formed FPA Investment Management (FPA) All three of these individuals have enjoyed considerable success in their careers Freeman is highly regarded for her expertise in the area of security analysis, while Pallence and Antonasanti are well known for their exemplary management of xedincome and equity portfolios, respectively In the initial period after its inception, FPA only accepted high net worth clients, requiring a minimum investment of $5 million In early 2000, however, FPA made the decision to expand its client base by lowering its minimum investment requirement to $2 million In the e ort to attract new clients and improve the information it provided for its current clients, FPA prepared and distributed performance presentations that re ected the results of its three primary in investment styles That is, FPA presented performance results for an intermediate xed-income composite, a broad equity composite, and a balanced composite The following list describes en tre some of the actions that FPA took when preparing its performance presentations Action Number Description Accrual accounting and book values were used to compute xed-income returns Trading expenses were deducted prior to calculating returns Fee schedules were included in the presentations .o m bo ok c All composites included only assets under management and were not linked with simulated or model portfolio performance All actual fee-paying discretionary accounts were included in at least one of the three composites Asset-weighted composite returns were calculated using endof-period weightings The performance of the equity portion of the balanced accounts, excluding cash, was combined with the equity composite results The S&P 500 index was used as the benchmark for all three composite performance presentations Equal-weighted rates of return that adjust for cash ows were used w w w Which of FPA's actions indicated below are NOT in compliance with the Global Investment Performance Standards (GIPS)? https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice/qbank/24038518/quiz/83448709/print 2/46 10/12/2018 Learning Management System A) Actions and B) Actions and C) Actions and Question #3 of 103 If DeLecrette Investment Management wishes to claim compliance with the Global Investment Performance Standards (GIPS®) for their annual nancial report, the report must include which in of the following statements? en tre A) DeLecrette Investment Management claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in li ih h G S d d h B) DeLecrette Investment Management has prepared and presented this report in b bo ok c compliance with the Global Investment Performance Standards (GIPS®) C) DeLecrette Investment Management has prepared and presented this report in m compliance with the Global Investment Performance Standards of the CFA Institute (CFA o Question #4 of 103 w w Which of the following statements most accurately describes why the Global Investment Performance Standards (GIPS) were created? To: w A) meet the need for a single globally accepted set of investment performance presentation standards B) provide comparability of performance results among nations for which no presentation guidelines currently exist C) meet the need for a single globally accepted set of regulatory guidelines among developed securities markets Question #5 of 103 https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice/qbank/24038518/quiz/83448709/print 3/46 10/12/2018 Learning Management System Jonathan Goolsby, a performance-reporting analyst at Handley Asset Management (HAM), is preparing after-tax returns for inclusion in a performance presentation and needs to determine the most appropriate method to incorporate the e ects of taxes on returns HAM employs taxaware portfolio management strategies If Goolsby uses the mark-to-liquidation method when computing after-tax returns, the most likely e ect is that returns will be: A) correctly stated B) understated Question #6 of 103 en tre in C) overstated Which of the following ratios is least likely to be shown in a performance presentation under the GIPS provisions for private equity? bo ok c A) Total value to residual value B) Paid-in capital to committed capital .o m C) Cumulative distribution to paid-in capital w w Question #7 of 103 Which of the following is NOT a composite construction requirement under the Global w Investment Performance Standards (GIPS)? A) Firm composites must be de ned according to similar investment objectives and/or strategies B) Carve-out returns excluding cash cannot be used to create a stand-alone composite C) Firms must disclose the use of simulated or model portfolio results Question #8 of 103 https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice/qbank/24038518/quiz/83448709/print 4/46 10/12/2018 Learning Management System Firm X currently claims compliance with the Global Investment Performance Standards (GIPS) but uses settlement-date accounting Beginning January 1, 2005, what must Firm X to remain compliant? A) Nothing, there is no change in requirements B) Begin using trade-date accounting and recalculate historical performance of its composites .in C) Begin using trade-date accounting en tre Question #9 of 103 Which of the following best describes the underlying principles upon which the Global Investment Performance Standards (GIPS) are based? A) Uniformity and consistent application of standards for the global regulation of the bo ok c securities industry B) Fair and consistent application of a global set of regulatory requirements .o m C) Full disclosure and fair representation of performance results w w Question #10 of 103 Which of the following lines of argument has/have been put forth to justify the establishment of w the Global Investment Performance Standards (GIPS)? A) All of these choices are correct B) To enhance consistency in the use of the standards C) To increase the dence that prospective and existing clients have in the industry Question #11 of 103 https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice/qbank/24038518/quiz/83448709/print 5/46 10/12/2018 Learning Management System In October of 2008, Alice Freeman, Georgeanne Pallence, and Mark Antonasanti formed FPA Investment Management (FPA) All three of these individuals have enjoyed considerable success in their careers Freeman is highly regarded for her expertise in the area of security analysis, while Pallence and Antonasanti are well known for their exemplary management of xedincome and equity portfolios, respectively In the initial period after its inception, FPA only accepted high net worth clients, requiring a minimum investment of $5 million In early 2010, however, FPA made the decision to expand its client base by lowering its minimum investment requirement to $2 million In the e ort to attract new clients and improve the information it provided for its current clients, FPA prepared and distributed performance presentations that re ected the results of its three primary in investment styles That is, FPA presented performance results for an intermediate xed-income composite, a broad equity composite, and a balanced composite The following list describes en tre some of the actions that FPA took when preparing its performance presentations Action Number Description Accrual accounting and book values were used to compute xed-income returns Trading expenses were deducted prior to calculating returns Fee schedules were included in the presentations .o m bo ok c All composites included only assets under management and were not linked with simulated or model portfolio performance All actual fee-paying accounts were included in at least one of the three composites Asset-weighted composite returns were calculated using endof-period weightings The performance of the equity portion of the balanced accounts, excluding cash, was combined with the equity composite results The S&P 500 index was used as the benchmark for all three composite performance presentations Equal-weighted rates of return that adjust for cash ows were used w w w Which of FPA's actions indicated below are NOT in compliance with the Global Investment Performance Standards (GIPS)? https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice/qbank/24038518/quiz/83448709/print 6/46 10/12/2018 Learning Management System A) Actions 6, 8, and B) Actions 1, 6, and C) Actions 2, 3, and Question #12 of 103 Which of the following regarding the GIPS real estate valuation principles is most accurate? in A) The GIPS recommend that real estate investments be valued externally by outside sources en tre B) Fees paid to external valuators must not be based on resulting value Question #13 of 103 bo ok c C) The GIPS require the reporting of a single appraisal value Which of the following is NOT an important characteristic of how a rm de nes itself? The rm m de nition establishes the: o A) set of portfolios that must be included in at least one of a rm's composites w w B) entity to which the GIPS standards apply when a claim of compliance is made w C) entity to which local securities laws apply when they exceed the GIPS requirements Question #14 of 103 https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice/qbank/24038518/quiz/83448709/print 7/46 10/12/2018 Learning Management System The Alexo Investment Management Group manages the investments for 30 retail clients Alexo has full discretion over the investments of these clients' assets At the close of each day, the excess cash in the clients' portfolios is swept into a money market fund Alexo does not manage the money market fund, so it does not include the cash portion of the portfolio in its total return performance calculations Alexo discloses its treatment of cash and cash equivalents in its performance presentation Which of the following statements regarding Alexo's compliance with the Global Investment Performance Standards (GIPS) is CORRECT? Alexo is: A) in compliance with the GIPS standards The Standards not require excess cash to be in included in total return performance calculations unless the composite consists en tre i il f h h i l B) not in compliance with the GIPS standards The Standards require cash to be included in total returns calculations if the portfolio manager has control over the amount of the f li h i ll d h C) in compliance with the GIPS standards The Standards not require cash or cash equivalents to be included in total return performance calculations unless the portfolio l h h h i l m Question #15 of 103 f h bo ok c h White and White Associates (WWA) is a money management rm that is planning to advertise o that it is GIPS compliant In the advertisement, WWA may include performance results: w w A) only if WWA includes further information including the return of the composite's benchmark w B) only if there has been third-party veri cation C) and does not have to include any additional information concerning performance Question #16 of 103 As part of the veri cation process of a rm claiming GIPS compliance, the third party doing the veri cation asks for a list and description of the rm's composites and a list of all portfolios under the rm's management Which of these requests is (are) actually part of the preparation process? https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice/qbank/24038518/quiz/83448709/print 8/46 10/12/2018 Learning Management System A) A list and description of composites but not a list of all portfolios under management B) Both asking for a list and description of composites and a list of all portfolios under management C) A list of all portfolios under management but not a list and description of composites Question #17 of 103 Mesa Asset Management has claimed compliance with the Global Investment Performance in Standards (GIPS®) for many years and it is now January 1, 2011 Robert Flay, managing director for Mesa wants to go beyond merely complying with the standards and wants to incorporate all en tre of the GIPS recommendations, particularly those dealing with presentation and reporting Flay asks two of his performance analysts, Catherine Cora and Luigi Batali for suggestions as to how Mesa can incorporate the recommendations bo ok c Cora: "Mesa is permitted to link our noncompliant annual performance data from 1996-1999 to our GIPS compliant data, as long as we meet the disclosure requirements GIPS reporting recommendations suggest that we eliminate all non-compliant data after presenting the required years of compliant historical performance." w w o m "Including a measure of the standard deviation of composite returns is extra information that will provide prospective clients with Batali: information regarding the uctuation of composite returns over time." w After listening to their statements, Flay should: A) agree with Cora, but disagree with Batali B) disagree with both Cora and Batali C) disagree with Cora, but agree with Batali Question #18 of 103 https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice/qbank/24038518/quiz/83448709/print 9/46 10/12/2018 Learning Management System Teaton Investment Management (TIM) has recently developed a proprietary prediction model To test the model, TIM created a returns history for an equity value portfolio using hypothetical assets and a back-tested asset allocation strategy TIM intends to include the simulated portfolio results in its performance presentation Which of the following most accurately describes TIM's compliance with the Global Investment Performance Standards (GIPS)? (Assume that TIM is GIPS-compliant in all other areas) TIM is: A) GIPS-compliant as long as it discloses the inclusion of simulated returns in its performance presentation B) GIPS-compliant if it includes the simulated portfolio in a composite that consists solely in of simulated portfolios C) not GIPS-compliant because the standards not permit the inclusion of simulated bo ok c Question #19 of 103 en tre portfolio results in performance presentations Which of the following statements best describes possible investment strategies of a rm's composites? m A) The strategies should not overlap, so as to prevent portfolios falling under multiple composite descriptions .o B) Strategies should avoid having too many quali ers to prevent the manager from having w w a large number of small composites C) Strategies should be as fully de ned as possible so that portfolios within the composites w closely match each other Question #20 of 103 As countries adopt the Global Investment Performance Standards (GIPS), which of the following is least likely to occur? A) Existing and potential clients will be able to make fair and unambiguous comparisons among investment rms B) Competition in the global investment industry will be enhanced https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice/qbank/24038518/quiz/83448709/print 10/46 10/12/2018 Learning Management System C) “Brown and Brown Associates claims compliance with the Global Investment Performance Standards (GIPS®)” Question #74 of 103 A rm calculates income return, capital return and total return for their real estate composite using the GIPS provisions for real estate Is it necessary for the sum of income return plus capital return to equal total return in each quarter, and the sum of the four quarterly income B) Yes Yes C) No Yes bo ok c No m A) Yes Annual Sum en tre Quarterly Sum in returns to equal the income return for the year? o Question #75 of 103 w w A rm does not disclose the valuation hierarchy that they are employing to value an asset, but the rm is properly following GIPS valuation principles If the valuation of the asset cannot be determined through objective and observable pricing for similar investments in active markets, w which of the following should be the "next source" of a valuation estimate, in accordance with CFA Institute GIPS recommendations? A) Quoted pricing for similar and/or identical assets in markets that are not active B) Market-based input other than quoted pricing that is observable for the asset C) Subjective, unobservable inputs Question #76 of 103 https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice/qbank/24038518/quiz/83448709/print 32/46 10/12/2018 Learning Management System The Global Investment Performance Standards (GIPS) apply to investment management rms They are NOT intended to serve which of the following? A) Consultants that advise investors B) Prospective clients of investment rms C) Securities market regulators .in Question #77 of 103 LeReaux Investment Management has created the performance presentation shown below en tre LeReaux, in existence since 1993, believes its presentation complies with the Global Investment Performance Standards (GIPS) 2003 4.3 2004 12.1 2005 14.5 Composite Dispersion (%) m 7.2 Total Assets at End of Period Percentage of Firm Assets Total Firm Assets 24 3.0 187 46 407 33 4.4 222 56 396 51 1.2 289 64 452 65 2.9 355 62 572 o 2002 Number of Portfolios w w Year Total Return (%) bo ok c LeReaux Investment Management, IncorporatedEquity CompositeJanuary 1, 2001, through December 31, 2005 w LeReaux has performed all calculations in this presentation in accordance with the Global Investment Performance Standards (GIPS) Which of the following is NOT an error or omission in LeReaux's presentation that renders it non-compliant with GIPS? GIPS requires rms to: A) present ve years of compliant performance B) disclose whether accrual accounting was used for dividends C) disclose whether performance results are calculated gross or net of fees https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice/qbank/24038518/quiz/83448709/print 33/46 10/12/2018 Learning Management System Question #78 of 103 Which of the following portfolios is least likely to be included in a composite described as "U.S Equity composite"? A portfolio: A) of U.S equities that may not diverge from the S&P 500 index performance by more than 100 basis points per year B) of U.S equities that must hold at least 20% in cash C) consisting mostly of U.S equities that is already included in the same manager’s “Global en tre in Equity composite” Question #79 of 103 PTN, Inc., is an investment consulting rm It has used Global Investment Performance bo ok c Standards (GIPS) since its inception two years ago PTN claims to be in compliance with GIPS Could this statement be CORRECT? A) No, PTN does not have a ve-year compliance track record B) Yes, PTN does not have a ve-year track record, so since inception is su cient w w o m C) No, consulting rms cannot be GIPS compliant Question #80 of 103 w A rm that is claiming GIPS compliance is considering veri cation Veri cation is most accurately described as: A) being performed on a selected number of composites but pertaining to all composites as part of the rm wide veri cation B) can pertain to select composites after the whole rm has been veri ed C) being performed on all composites as part of the rm wide veri cation Question #81 of 103 https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice/qbank/24038518/quiz/83448709/print 34/46 10/12/2018 Learning Management System Which of the following compliance statements is mandated by the Global Investment Performance Standards (GIPS)? A) [Insert name of rm] has prepared and presented this report in compliance with the Global Investment Performance Standards (GIPS®) B) [Insert name of rm] claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the G S d d f h b i d d l i d C) [Insert name of rm] has prepared and presented this report in compliance with the Global Investment Performance Standards (GIPS) of the CFA Institute CFA Institute has i l di h i i f hi i en tre in b Question #82 of 103 The GIPS provisions for private equity require the vintage year to be presented Which of the bo ok c following best describes the vintage year? The vintage year is the year in which: A) the rst material investment was made B) capital is rst drawn down from investors .o m C) the composite was created w w Question #83 of 103 A composite is an aggregation of discretionary portfolios into a single group that represents a w particular investment objective or strategy Composites are the primary vehicle for presenting performance to a prospective client Which of the following statements concerning composites is least accurate? A) All actual fee-paying discretionary portfolios must be included in at least one composite B) Portfolios may not be switched from one composite to another C) Firm composites must be de ned according to similar investment objectives and/or strategies https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice/qbank/24038518/quiz/83448709/print 35/46 10/12/2018 Learning Management System Question #84 of 103 A rm reports returns on real estate investments The rm has not complied with GIPS by committing an omission or error if it: A) calculates income returns and capital returns using geometrically linked time-weighted rates of return B) computes returns based on capital employed, computed by adjusting the beginning capital for time-weighted cash ows that occur during the measurement period en tre in C) reports total return but not income return and capital return Question #85 of 103 A portfolio changes from being discretionary to being non-discretionary What action should bo ok c the manager take with respect to composite construction and calculation? A) The manager must leave the portfolio in the calculation of historic performance but must remove the portfolio from future calculations B) The manager may leave the portfolio in the calculation of historic performance but may m remove the portfolio from future calculations w w w performance .o C) The manager must remove the portfolio from the composite, including the historic Question #86 of 103 https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice/qbank/24038518/quiz/83448709/print 36/46 10/12/2018 Learning Management System In October of 1998, Alice Freeman, Georgeanne Pallence, and Mark Antonasanti formed FPA Investment Management (FPA) All three of these individuals have enjoyed considerable success in their careers Freeman is highly regarded for her expertise in the area of security analysis, while Pallence and Antonasanti are well known for their exemplary management of xedincome and equity portfolios, respectively In the initial period after its inception, FPA only accepted high net worth clients, requiring a minimum investment of $5 million In early 2000, however, FPA made the decision to expand its client base by lowering its minimum investment requirement to $2 million In the e ort to attract new clients and improve the information it provided for its current clients, FPA prepared and distributed performance presentations that re ected the results of its three primary in investment styles That is, FPA presented performance results for an intermediate xed-income composite, a broad equity composite, and a balanced composite The following list describes en tre some of the actions that FPA took when preparing its performance presentations Action Number Description Accrual accounting and book values were used to compute xed-income returns Trading expenses were deducted prior to calculating returns The fee schedules were included in the presentations .o m bo ok c All composites included only assets under management and were not linked with simulated or model portfolio performance All actual fee-paying discretionary portfolios were included in at least one of the three composites Asset-weighted composite returns were calculated using endof-period weightings The performance of the equity portion of the balanced accounts, excluding cash, was combined with the equity composite results The S&P 500 index was used as the benchmark for all three composite performance presentations Equal-weighted rates of return that adjust for cash ows were used w w w Which of FPA's actions indicated below is NOT in compliance with the Global Investment Performance Standards (GIPS)? https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice/qbank/24038518/quiz/83448709/print 37/46 10/12/2018 Learning Management System A) Action B) Action C) Action Question #87 of 103 According to GIPS, when presenting performance to a prospective wrap fee sponsor, an in investment manager must: A) present performance of all wrap fee accounts in the composite being presented en tre B) not link non-compliant performance that occurs before January 2006 with compliant performance C) disclose the names of the wrap fee sponsors when presenting sponsor-speci c m Question #88 of 103 bo ok c composites With respect to reporting a composite's creation date and any changes in a composite's name, o which is a requirement of GIPS? w w A) Changes in a composite’s name but not its creation date B) The creation date but not changes in a composite’s name w C) Both the creation date and any changes in a composite’s name Question #89 of 103 Which of the following descriptions are appropriate quali ers for a composite? "Small Cap" A) Appropriate "High Duration" Appropriate "Above €10 million" Not appropriate https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice/qbank/24038518/quiz/83448709/print 38/46 10/12/2018 Learning Management System B) Appropriate Not appropriate Appropriate C) Appropriate Appropriate Appropriate Question #90 of 103 Three portfolio managers left their previous employer two years ago to form Atomic Investment Management The reason for their departure was a desire to be solely responsible for investment decisions as opposed to the consensus approach that was utilized at their old in rm Atomic wants to claim compliance with the Global Investment Performance Standards en tre (GIPS), but does not have a 5-year minimum compliance history Under the GIPS standards, which of the following actions may Atomic take in order to claim compliance? Atomic may: A) not present its performance in compliance with the GIPS until it has established a 5year performance history bo ok c B) link three years of the managers' performance history from the previous employer to the 2-year history since Atomic's inception with a clear and unambiguous disclosure m C) present a 2-year GIPS-compliant performance history w w o Question #91 of 103 Assume that on January 1, 2005, a 15-year old rm with no Global Investment Performance Standards (GIPS) compliant performance history wishes to claim compliance with the GIPS w standards Which of the following accurately re ects the appropriate action for the rm to take? A) Comply with the GIPS standards for the 5-year period January 1, 2000, through December 31, 2004, and report ve additional years of non-GIPS-compliant f d di l f h h f i h li i G S B) Comply with GIPS for the year beginning January 1, 2004, and report four additional years of performance history ( ve total) and disclose why the earlier years are not GIPS li C) Comply with GIPS for the year beginning January 1, 2004, and report nine additional years of performance history (ten total) and disclose why the earlier years are not GIPS li https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice/qbank/24038518/quiz/83448709/print 39/46 10/12/2018 Learning Management System w w w o m bo ok c en tre in Question #92 of 103 https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice/qbank/24038518/quiz/83448709/print 40/46 10/12/2018 Learning Management System In October of 1998, Alice Freeman, Georgeanne Pallence, and Mark Antonasanti formed FPA Investment Management (FPA) All three of these individuals have enjoyed considerable success in their careers Freeman is highly regarded for her expertise in the area of security analysis, while Pallence and Antonasanti are well known for their exemplary management of xedincome and equity portfolios, respectively In the initial period after its inception, FPA only accepted high net worth clients, requiring a minimum investment of $5 million In early 2000, however, FPA made the decision to expand its client base by lowering its minimum investment requirement to $2 million In the e ort to attract new clients and improve the information it provided for its current clients, FPA prepared and distributed performance presentations that re ected the results of its three primary in investment styles That is, FPA presented performance results for an intermediate xed-income composite, a broad equity composite, and a balanced composite The following list describes en tre some of the actions that FPA took when preparing its performance presentations Action Number Description Accrual accounting and book values were used to compute xed-income returns Trading expenses were deducted prior to calculating returns Fee schedules were included in the presentations .o m bo ok c All composites included only assets under management and were not linked with simulated or model portfolio performance All actual fee-paying accounts were included in at least one of the three composites Asset-weighted composite returns were calculated using endof-period weightings The performance of the equity portion of the balanced accounts, excluding cash, was combined with the equity composite results The S&P 500 index was used as the benchmark for all three composite performance presentations Equal-weighted rates of return that adjust for cash ows were used w w w Which of FPA's actions indicated below is in compliance with the Global Investment Performance Standards (GIPS)? https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice/qbank/24038518/quiz/83448709/print 41/46 10/12/2018 Learning Management System A) Action B) Action C) Action Question #93 of 103 Of the following, with respect to GIPS, the one that is not a requirement and is only a A) how the rm de nes itself to determine the total assets .in recommendation is: en tre B) a list of any composites that have been discontinued within the last ve years bo ok c C) a list of other rms contained within a parent company Jessica Yee, a portfolio manager for the National Investing Alliance (NIA), wants to create a high yield composite portfolio for marketing purposes from several other portfolios The portfolios to be drawn from include a high yield bond portfolio, a convertible debt portfolio, and a large cap equity growth portfolio In the composite she did not wish to include any historical results m from terminated portfolios, nor did she feel it was important to include the cash associated with these portfolios (since the cash was managed by another department of NIA) Yee believed o that hedging was a very important element of her investment philosophy in these volatile w w markets, so she delegated this responsibility to another department within NIA, but she did not wish to include their hedging results with her composite results Yee wants to be able to claim w compliance under Global Investment Performance Standards (GIPS®) Question #94 of 103 Which of the following statements describes how Yee should approach the formation of the composite? A) The large cap equity growth portfolio must not be included in the composite B) The high yield bond portfolio and convertible debt portfolio should be in di erent composites since they represent di erent investment objectives https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice/qbank/24038518/quiz/83448709/print 42/46 10/12/2018 Learning Management System C) Since the large cap equity growth portfolio is part of the overall portfolios managed by NIA it can be included in the same composite with the high yield bond and convertible d b f li Question #95 of 103 With respect to the exclusion of terminated portfolios, is her approach correct? A) Yee should include the results of terminated portfolios .in B) Terminated portfolios are allowed to be dropped from composites when the portfolio is no longer actively managed en tre C) Yee should include the results of terminated portfolios through the date the portfolio Question #96 of 103 bo ok c was last managed Which of the following best describes the cash portfolio results with respect to the overall m portfolio results? A) Since the cash component of the portfolio is managed by another department it is not o necessary to include it in the overall portfolio results w w B) The returns from the cash component of Yee’s portfolio must be included in the overall portfolio results w C) If a third party entity manages the cash component of the portfolio it is not necessary to include the cash returns in the overall portfolio results Question #97 of 103 Is Yee correct in excluding the hedging activity results with her portfolio results? A) Yes, since the use of hedging is negligible the hedging results need not be included in the overall portfolio results https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice/qbank/24038518/quiz/83448709/print 43/46 10/12/2018 Learning Management System B) Yes, since Yee is not actually managing the hedging activities she should not include these results into the overall portfolio results C) No, given Yee’s investment philosophy, the hedging results should be included in her portfolio results Question #98 of 103 A composite contains portfolios A, B, C and D that had returns during the year of 3.8 percent, in -4.6 percent, 16.1 percent and 7.4 percent respectively Which of the following statements best en tre describes the provisions of GIPS with respect to measures of dispersion? A) The standard deviation should be shown using either equal weightings or asset weightings B) No measure of dispersion needs to be presented bo ok c C) The standard deviation is the most appropriate measure, but the rm should disclose whether the denominator in the calculation is the number of portfolios or the number f li i m f o Question #99 of 103 w w Which of the following items is NOT required to be included as part of a private equity performance presentation? w A) Capital drawn down from partners during the year B) Gross-of-fees since inception internal rate of return C) Net-of-fees since inception internal rate of return Question #100 of 103 Which of the following is NOT a Global Investment Performance Standards (GIPS) input data requirement? A) For periods beginning January 1, 2005, rms must use settlement date accounting https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice/qbank/24038518/quiz/83448709/print 44/46 10/12/2018 Learning Management System B) Portfolio valuations must be based on fair value (not cost basis or book values) C) For periods beginning January 1, 2010, portfolios must be valued on the date of all large cash ows Question #101 of 103 Which of the following is NOT a Global Investment Performance Standards (GIPS) presentation and reporting requirement? in A) The composite creation date aggregate composite return en tre B) A measure of the dispersion of individual component portfolio returns around the Question #102 of 103 bo ok c C) Performance for periods of less than one year must be annualized Achieving comparability among investment management rms' performance presentations m requires uniformity in methods used to calculate returns Which of the following statements w w accurate? o concerning Global Investment Performance Standards (GIPS) calculation methodology is least A) Performance must be calculated prior to the deduction of all trading expenses w B) In both the numerator and the denominator, the market values of xed-income securities must include accrued income C) If a rm sets a minimum asset level for portfolios to be included in a composite, no portfolios below that initial asset level can be included in that composite Question #103 of 103 https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice/qbank/24038518/quiz/83448709/print 45/46 10/12/2018 Learning Management System The investment management rm of Rakes, Finch, and Weeks (RFW) manages several feepaying portfolios to a long-short strategy RFW does not ever intend to market this strategy, so they not include the performance of these portfolios in any of the rm's composites Which of the following statements indicates what RFW must if it intends to claim compliance with the Global Investment Performance Standards (GIPS)? RFW must: A) disclose the fact that the long-short portfolios are not included in any of the rm's composites B) include the long-short portfolios in at least one of the rm's composites C) include the long-short portfolios in a composite of portfolios managed to a strategy that w w w o m bo ok c en tre in the rm does not intend to market https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice/qbank/24038518/quiz/83448709/print 46/46 ... justify the establishment of w the Global Investment Performance Standards (GIPS)? A) All of these choices are correct B) To enhance consistency in the use of the standards C) To increase the dence... Performance Standards of the CFA Institute (CFA o Question #4 of 1 03 w w Which of the following statements most accurately describes why the Global Investment Performance Standards (GIPS) were... with GIPS Question #37 of 1 03 In January 20 03, the Medusco Investment rm has decided to present its performance history in compliance with the Global Investment Performance Standards (GIPS) Medusco