Q & A Database

The GIPS Standards Q&A database contains questions and answers (Q&As) on various searchable topics that provide additional interpretation on an issue. Q&As are considered to be authoritative guidance and must be followed in order to claim compliance with the GIPS standards.

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  • Current

    Effective: 1 January, 2020
    Categories: Leverage/Derivatives
    Source: 2020 GIPS Standards

    Please provide an example for how to calculate a return for a portfolio that employs a market neutral strategy.

    A client provided a hedge fund manager with capital of $100 at the beginning of the first month. The hedge fund manager deposited $100 with a prime broker and constructed positions of $100 long stocks and $100 short stocks. At the end of the first month, values of long stocks and short stocks are $109 and $107, respectively. The fund manager received interest of $0.30 (annual rate of 3.6%) from the prime broker. The value of the total portfolio changes from $100 (= $100 + $100 – $100) to $102.30 (= $100 + $109 – $107 + $0.30) and there are no external cash flows for the period.

     R = (102.3 – 100) / 100 = 2.3%

    Please also see the prior version