$million Falcon Wealth Managers, Inc., claims compliance with the Global Investment Performance Standards GIPS® and has prepared and presented this report in compliance with the GIPS st
Trang 1Use the following information for Questions 1 through 6.
Tom Hall is a portfolio manager for Falcon Wealth Managers, Inc Falcon advises wealthy individual investors and provides recommendations for stocks, bonds, and alternative assets Falcon uses the CFA Institute's Global Investment Performance Standards (GIPS®) to provide a standardized presentation of its firm's performance The table below and its footnotes are from Hall's presentation of the performance for Falcon's Global Fixed-Income Composite Although Falcon claims GIPS compliance, it has not been externally verified
Total
Return
(gross of
fees)
Benchmark Return
Number of Portfolios
Composite Dispersion
Total Composite Assets at the End
of Period (in U.S
$million)
Total Firm Assets
at the End of Period (in U.S
$million)
Falcon Wealth Managers, Inc., claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards Falcon Wealth Management, Inc., has not been independently verified
Notes:
1 Falcon Wealth Managers, Inc., is defined as an independent investment management firm that is not affiliated with any parent organization The firm invests in U.S and international securities
2 Portfolio valuations were performed every month For thinly traded junk bonds, Falcon uses
an average of three independent bids For thinly traded international bonds, Falcon values the bonds using its original cost
3 The benchmark for this composite is an appropriate fixed income index
4 The Falcon Wealth Managers Global Fixed-Income Composite was created in 1992 No modifications to the composite presented here have occurred as a result of changes in personnel or for any other reason at any time A complete list of firm composites and
performance results is available upon request
Trang 25 The dispersion of annual returns is measured by the equal-weighted standard deviation of portfolio returns included within the composite for the full year
6 The historical performance record presented for the Global Fixed-Income Composite
includes the performance of terminated portfolios If a portfolio is terminated within a year, the performance of that portfolio is annualized to represent its return for the last
measurement period After that year, the returns for terminated portfolios are then dropped
7 Performance results are presented before management fees but net of all actual trading costs A management fee schedule is attached to this report
8 Performance results are presented in U.S dollar terms
Martha Sims is one of Falcon's oldest clients She would like to know how her portfolio has performed over the most recent quarter She received a mid-year performance bonus at work, which she invested in August As her grandson has just started college, Sims liquidated a portion
of her portfolio to pay for his tuition in September The market value of her portfolio and its cash flows are shown below:
Market Value Cash Flow
Market Value After
CF
6/30/2015 800,000
7/31/2015 860,000
8/8/2015 890,700 42,000 932,700
8/31/2015 780,000
9/18/2015 920,000 (32,000) 888,000
9/30/2015 910,000
Question #1 of 6
Considering only the table headings (consider only what is presented and do not comment on any missing information), Falcon's presentation:
A) should list composite assets as a percent of total firm assets to be in compliance with GIPS standards
B) is in compliance with GIPS standards
C) should list the returns net of management fees to be in compliance with GIPS standards
Trang 3Question #2 of 6
Regarding the valuation of portfolios in Falcon's presentation:
A) the valuation method used for international and junk bonds is not in compliance with GIPS standards
B) it is in compliance with GIPS standards
C) the valuation method used for the junk bonds is in compliance with GIPS standards but for international bonds is not in compliance with GIPS standards
Question #3 of 6
The handling of returns for terminated portfolios in the Falcon Global Fixed-Income Composite is:
A) in compliance with GIPS standards
B) not in compliance with GIPS standards because the partial-year returns for terminated
portfolios should not be annualized, and the historical record for terminated portfolios should
be dropped
C) not in compliance with GIPS standards because the partial-year returns for terminated
portfolios should not be annualized
Question #4 of 6
To be in compliance, the table must also include standard deviation of returns for the composite and benchmark based on:
A) 10 years of annual data
B) 36 months of data
C) since inception years of data
Question #5 of 6
Regarding the information presented on the benchmark used for comparison and the composite creation date:
A) the benchmark description and composite creation date are not in compliance
Trang 4B) the benchmark description is not and composite creation date is in compliance
C) the benchmark description and composite creation date are both in compliance
Question #6 of 6
If the monthly returns of the Sims portfolio in July and August are 7.50% and -13.39%, the GIPS-compliant return for the quarter is closest to:
A) -13.4%
B) 12.6%
C) 60.5%