The Investment Advisor Body of Knowledge + Test Bank. IMCA

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      A. Calculations

      1. The reporting start date should be the date that represents the appropriate starting point for monitoring the investment manager's results, which is generally the month following inception.

      2. When portfolio performance is segregated, cash and equivalents should be treated as a distinct asset class.

      3. Portfolio data should be calculated on the basis of trade date. When trade-date accounting is not possible, settlement-date accounting may be used.

      4. Switching between trade-date and settlement date calculations is not permitted unless required for reasons such as a change in the accounting basis of the underlying custodial reports.

      5. Interest income should be calculated on an accrual basis. The use of dividend receivables is strongly recommended.

      6. Estimates of accrued income are permissible and should be disclosed to the client when used in lieu of actual accrued income.

      7. Convertible securities should be treated as a separate asset class or equity asset.

      8. Total rate of return, including capital appreciation plus income, is strongly recommended for judging overall investment results.

      9. A time-weighted rate-of-return calculation that minimizes the impact of cash flows should be used for any comparisons of the investment manager with appropriate indices or other managers.

      10. A dollar-weighted (internal) rate-of-return calculation should be used for comparisons with “dollar-” or “value-based” investment objective(s) such as actuarial rates of return or inflation. Dollar-weighted returns should also be used for some alternative investments where the manager controls cash flows.

      11. When cash flow in excess of 10 percent of the market value of the portfolio or portfolio segment occurs, and the interim market value is available, an interim time-weighted calculation should be performed.

      12. Gross returns (before deduction of fees) and net returns (after deduction of fees) should be calculated.

      13. Returns should always be calculated after deduction of brokerage commissions.

      14. Vehicle-specific considerations:

      a. Wrap-fee performance should be presented after deduction of all bundled fees. Gross performance (before all bundled fees) may also be shown.

      b. Net performance calculations for pooled private investment vehicles should reflect all fees and commissions both inside and outside of the vehicle.

      c. Mutual fund performance should be presented after deduction of all expenses, including loads.

      B. Client composites

      1. Individual portfolios should be aggregated into a composite portfolio to enable the client to evaluate the performance of an overall pool of assets (e.g., the performance of the salaried employees' plan or the equity-oriented investment managers).

      2. Composites should be aggregated by combining the market values and cash flows of the individual portfolios.

      3. For client-reporting purposes, composites should not be created by averaging the returns of the individual portfolios.

      C. Statistical measures of risk

      1. Measures of risk should be presented in addition to rates of return to give the client a more complete picture of the investment manager's results. The consultant should determine the number of observations that are sufficient for risk calculations.

      2. At a minimum, portfolio risk should be measured by calculating an annualized standard deviation derived from monthly or quarterly total rates of return for a meaningful reporting period (as determined by the consultant).

      3. Beta, residual standard deviation, correlation, covariance, semivariance, or other measures may be presented when appropriate.

      4. Presentation of fundamental portfolio characteristics such as yield, price-earnings ratio, duration, or quality is encouraged.

      D. Benchmarks

      1. Benchmarks that represent the portfolio's investment style, strategy, and level of risk should be selected.

      2. Benchmarks should be constructed on the basis of total return.

      3. Balanced benchmarks should be constructed when necessary. Appropriate rebalancing techniques should be used.

      4. The benchmarks used as comparisons for a portfolio segment should reflect as accurately as possible the type of investment assets held in that segment.

      5. Benchmark comparisons should be applied consistently over time, and any substantial changes in their composition should be disclosed to the client.

      6. Composite results should be presented with their own set of benchmarks that reflect the asset mix and investment objective of the combined pool of assets.

      7. The return for an individual manager should be contrasted to the manager's composite return for the appropriate mandate.

      E. Comparative sample peer construction

      1. If a manager's performance is compared with that of a peer group of managers, the peer group should be of similar style.

      2. Time-weighted total rates of return should be used for construction of and comparisons with peer group samples.

      3. Returns should be calculated either before or after deduction of investment management fees to ensure consistency and to allow comparison with the client portfolio.

      4. Cash and equivalents for portfolios in the comparative sample should be treated in a manner consistent with the management of the client's portfolio.

      5. The consultant should disclose to the client the construction and composition of any sample used for comparative purposes.

      6. Sample comparisons should remain consistent over time unless material changes have occurred in the client's portfolio.

      7. If measures of risk are presented for the portfolios in the comparative sample, a consistent method for calculating these measures should be used for all component portfolios.

      8. If balanced-portfolio comparative samples are constructed from the returns for equity, fixed income, cash and equivalents, and other types of portfolios, returns for the balanced portfolio should be calculated with the assumption of at least annual rebalancing.

      9. The consultant СКАЧАТЬ