GIPS-comliant Performance Reporting

GIPS-compliant Performance Reporting

#		GIPS Requirement	Non-GIPS-Compliant
1	Total Return	Total Return = (Price Return) + (Income Return) - (Actual Incurred Trading Expenses) (*1)	Estimated Trading Expenses
2	Minimum Asset Level	Disclosure
2	Material Changes in Calculation Methodology	Disclosure (*1)
4	Real Estate	Internal (in-house) Valuation: at least Quarterly (Jan 1, 2008 -) External Valuation: Every Year (as of Jan 1, 2010) (*6) Appraisal by a licensed appraiser: Every 3 Year
4	Alternative Investments (excluding Real Estate)	Internal (in-house) Valuation: at least Every Year
5	Discretionary / Non-discretionary Fee-Paying / Non-fee-paying	See (*3) for the composite inclusion rules.
6	Allocation of Cash to Carve-Out Asset Class	Separate Accounts or Sub Accounts for each carve-out and hold the cash in each appropriate carve-out segment (*4)
7	After Acquisition	Non-compliant firm's results be brought into compliance within 1 year (*5)

(*1) Realized and/or Unrealized returns

(*2) GIPS states disclosure of calculation methodology changes are recommended, not required. However, the fact that material changes are not being disclosed is something completely different. Material changes would have to be disclosed. Failing to do so is a violation of the standards of professional conduct and GIPS. (e.g., Standard I(C) Misrepresentation)
Covered persons have an ethical obligation not to misstate facts or present information in a way that might mislead investors. Investment professionals violate the Standard when they know, or should know, that the presentation was biased or misleading. By violating the Standards in relation to GIPS, GIPS are also violated.

(*3)

Composite Inclusion Rules

		Fee-Paying	Non-Fee-Paying
	Discretionary	Yes	Yes
	Non-Discretionary	No	No

(*4) Allocation of cash to carve-out asset class is no longer sufficient starting on Jan 1, 2010. If an investment firm wants to report carve-out performance, the firm must set up separate accounts or sub accounts for each carve-out and hold the cash in each appropriate carve-out segment.

(*5) The Track record from a prior firm or a affiliation must be linked to or used to identify the record of a new or acquiring firm on a composite basis if (1) the new or acquiring firm employs substantially all of the prior firm or affiliation's investment decision makers (2) the decision making process has remained intact at the new or acquiring firm, and (3) appropriate records exist to support reported performance combinations of a compliant and a non-compliant firm require that the non-compliant firm's results be brought into compliance within 1 year.

(*6) GIPS Recommendation (not Requirement)
Valuation by an External Valuation Expert or Appraiser: at least Every Year