Newsletter Archive: January 2008
GIPS Newsletter
New Q&As Posted on the GIPS Website
Since the beginning of the fourth quarter of 2007, more
than 20 new Q&As have been approved by the Interpretations
Subcommittee and posted to the GIPS website under the categories of
Advertising, Benchmarks, Carve-Outs, Client Reporting, Composite
Construction, Composite Changes, Correction to the 2006 GIPS standards,
Disclosures, Fees, General/Miscellaneous, Leverage and Derivatives,
Performance History/Track Record, Private Equity, Real Estate, and Wrap
Fee Portfolios. Firms are reminded that compliance with the GIPS
standards also includes adherence to all Q&As and other
guidance.
In particular, we would like to highlight the following Q&A on real
estate valuation; beginning 1 January 2008, firms are required to value
real estate assets quarterly.
Q: We manage real estate investments. We have established procedures to value all investments annually, and this process is quite extensive. Beginning 1 January 2008, the GIPS standards require us to value such investments on a quarterly basis. For those quarters where we do not obtain an external valuation and we perform an internal valuation, must we replicate the current annual procedures on a quarterly basis, or can we establish quarterly procedures that are different?
A: An internal valuation should consider professional industry approaches to estimating value (e.g., discounted cash flow valuation model, capitalized income approach, sales comparison approach, cost approach), and a professional review and assessment of the known economic, market, financial variables, and factors that can cause material changes in the value of real estate investments. Any assumptions utilized must be fair and unbiased. The internal valuation process must be applied consistently from period to period, except where a process change would result in a more accurate estimate of market value. A firm may replicate its current annual procedures on a quarterly basis, or the firm could establish different quarterly valuation procedures. Each firm must decide for itself what steps are necessary to determine that real estate investments are properly valued on a quarterly basis. As required by GIPS Provision 0.A.6, a firm must document, in writing, policies and procedures used in establishing and maintaining compliance with all the applicable requirements of the GIPS standards. Therefore, the firm must also document its real estate internal valuation policies and procedures.
Please visit our website to see the GIPS Q&A database.
GIPS® Standards Workshop
There is still space available at the upcoming GIPS standards
interactive workshop on 21 February 2008 in Stamford, CT. The workshop
will help participants master the requirements of the GIPS standards,
including composite construction, performance calculation, and creating a
compliant presentation. For complete details, please visit our website.
Governance
We are pleased to announce that the next in-person meetings of
the GIPS Executive Committee, Regional Investment Performance
Subcommittees (RIPS), and GIPS Council will be held on 13 and 14 March
2008 at the Amsterdam Marriott Hotel in Amsterdam, the
Netherlands. We encourage you to keep up to date on the latest
topics and developments with the GIPS standards by reviewing the
materials provided in advance of those meetings. Visit the GIPS website
in late February to view the meeting materials. These meetings are open
to the public and if you are interested in attending, please contact standards@cfainstitute.org
by 15 February 2008.
Current Volunteer Openings
The Global Investment Performance Standards (GIPS®) Nominations
Committee is seeking volunteers to serve on the GIPS Executive Committee
(EC). The GIPS EC is a 9 member committee that serves as the
decision-making authority to develop, interpret, and promote the GIPS
standards. Currently, the GIPS EC is seeking nominees to serve as Chair
of the Verification/Practitioner Subcommittee and to represent that
constituency within the GIPS EC. Volunteers must have investment
performance measurement and/or evaluation experience, knowledge of the
GIPS standards, and be able to represent the verification/practitioner
sector of the investment industry. The purpose of the
Verification/Practitioner Subcommittee is to represent GIPS standards
service providers in the development of the GIPS standards, and to serve
as a forum in which professionals may discuss various issues pertinent to
verification.
Additionally, the Investor/Consultant Subcommittee seeks candidates to
fill a vacancy. The ideal candidate will have expertise in investment
performance and be able to represent issues specific to investors (e.g.,
pension plans and other institutional investors) and investment
consultants. The Standards were created to benefit investors and it
is important that these stakeholders continue to have a strong voice in
the development of the Standards.
E-mail standards@cfainstitute.org
to volunteer for any of these important roles or to obtain more
information. The application deadline is 1 April 2008.
Your Feedback Welcome
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