Question #1 of 6
B) is in compliance with GIPS standards.
The table headings are in compliance with GIPS standards. To be in compliance with GIPS
standards, the presentation can list either the total firm assets or percent of firm assets represented
by the composite. Returns must be after actual transaction costs but can be gross or net of
management fees and a fee schedule must be attached.
Question #2 of 6
C) the valuation method used for the junk bonds is in compliance with GIPS standards but for
international bonds is not in compliance with GIPS standards.
An average of three independent bids for securities not regularly traded is acceptable. But using cost
basis is not acceptable.
Question #3 of 6
C) not in compliance with GIPS standards because the partial-year returns for terminated portfolios
should not be annualized.
The handling of returns for terminated portfolios is not in compliance with GIPS standards because
the partial-year returns for terminated portfolios should not be annualized. However, the historical
record for terminated portfolios must be included in the record of performance for the composite up
to the last full monthly measurement period.
Question #4 of 6
B) 36 months of data.
The table must include annualized standard deviation for the composite and benchmark computed
from 36 monthly returns for each. This requirement began for 2011 so this data must be shown for
2011, 2012, 2013, and 2014.
Question #5 of 6
B) the benchmark description is not and composite creation date is in compliance.
At the very least, a more full disclosure of the kinds of fixed income assets included in the composite
must be given to provide meaningful comparison. If it is not a custom benchmark but a benchmark
from a recognized vendor, the name should be given. The composite is more than 10 years old but
only a rolling 10-year record of results is required so that reporting is acceptable.
Question #6 of 6
GIPS requires time-weighted monthly returns. Within the month, sub period returns must be timeweighted with sub periods defined by the date of large ECFs.
For September, the return through 9/18 is: (920 - 780)/780 = 17.95%. Through 9/30, the return is
(910 - 888) / 888 = 2.48%.
This makes the September return for GIPS:
(1.1795)(1.0248) - 1 = 20.88%
The return for the quarter is:
(1.0750)(0.8661)(1.2088) - 1 = 12.55%
While they were given in the question, the July and August return calculations are shown below. July
is simple because there was no ECF:
July = (860 - 800)/800 = 7.50%
With an ECF, the August return must also be computed from the sub period returns:
Through 8/8: (890.7 - 860) / 860 = 3.57%
Through 8/31: (780 - 932.7) / 932.7 = -16.37%
Therefore August = (1.0357)(0.8363) - 1 = -13.39%
Note that 60.5% is the annualized quarterly return but annualizing periods less than one year is not
allowed for GIPS.