CFA Institute Exam CFA-Level-III Topic 2 Question 5 Discussion

HAS ONE PART Bailey Investments is a U.S.-based investment management firm. They began operations on January 1, 2004. Their client base has grown considerably over the last few years and in order to ensure accurate and consistent performance data they have decided to pursue GIPS compliance. The following includes composite data and notes relating to the first presentation for one of their composites in which they claim GIPS compliance. Bailey Investments has prepared and presented this report in compliance with the Global Investment Performance Standards (GIPS).

Notes:

1. Valuations are obtained by Reuters and computed using the U.S. dollar.

2. Bailey Investments is a dedicated equity portfolio manager that invests entirely in U.S. securities and has no affiliates.

3. The benchmark composition is 100% S&P 500. The annualized compound benchmark return is 8.15%. The annualized compound composite return is 8.06%.

4. Composite dispersion is the annualized monthly standard deviation of composite returns.

5. No modifications to the composites as presented here have occurred as a result of changes in personnel or for any other reason at any time.

6. Performance results are presented before management and custodial fees but after all trading commissions.

7. The composite includes discretionary and non-discretionary fee-paying portfolios. ListJour noncompliant items in the presentation. For each, state the necessary corrective action.