Model performance, such as the above, can be useful to investors. Therefore, in adopting the overhauled Rule 206(4)-1 under the Investment Advisers Act of 1940, as amended (the “Marketing Rule”), the Securities and Exchange Commission (“SEC”) permitted advisers to include model performance in advertisements, but considered it to be a type of “hypothetical performance” that is subject to certain conditions on its use.
This month’s newsletter is a tad longer than usual. Lots of fodder has come in, and so it made sense to include it.
Our monthly newsletter (which has been on quite a streak lately) will address two totally non-performance/risk measurement topics. They might be fun and interesting, or maybe not. Let us know.
We are approaching the one-year anniversary of the official launch of the SEC Marketing Rule. It introduced massive changes to the advertising rule; one of the major being that GIPS® reports are now advertisements.
The “standards,” speaking broadly for a moment, have had a habit of redefining terms that many folks in the investment industry were familiar with: altering terms can be confusing.
Perhaps if you’re like me, you’re getting tired of hearing about the [not so new] SEC Marketing Rule.
Abbreviating words has been a part of the English language for a very long time; and some areas of society tend to do more with them, or love them more, than others.
Perhaps you’ve seen the LinkedIn posts quoting the famed investor Warren Buffett decrying the world of private equity.
It was 25 years ago next month when I walked into Dr. David Spaulding’s (although he wasn’t a doctor then) office for my interview. I had been in food service for the prior eight years (through high school and college), and I had no idea what The Spaulding Group did.
This month’s newsletter is admittedly a bit short. We could ramble on-and-on about the topic we address, but feel that getting right to the point is sufficient. It’s an important one, and we hope what we share has value to you and your organization.
I recently heard the suggestion that if a GIPS® compliant firm’s P&P (Policies & Procedures) are less than 10 pages, then they’re too short. Obviously spoken by someone who likes to ramble or who avoids pithiness, crispness, succinctness in their writing (and perhaps their speech).
Things we find confusing…Sub-portfolio returns;What time-weighting means; The SEC marketing rule and attribution; 2023 Performance and Attribution Event Calendar
Books we wish we had read sooner; 2023 Performance and Attribution Event Calendar
SEC marketing rule – we’re down to just a few days; Performance Measurement Networking Groups – Fall Calendar; 2022 Performance and Attribution Training Calendar
When you think about it, what does the asset owner’s overall Time-weighted return mean?; Broker / Dealer Performance Measurement Networking Group; 2022 training and events calendar
Is it really best practice?; Broker / Dealer Performance Measurement Networking Group; 2022 training and events calendar
To what precision should your returns be reported?; 2022 training and events calendar
Why we don’t report performance this way; 2022 training and events calendar
SEC’s new marketing rules; Portability of performance; Do I have to go to ten years?; Attribution: Net and gross? What about risk?; 2022 training and events calendar
Time-weighted Rates of Return Ranked (Best to Worst); 2022 training and events calendar
What software vendors need to do in response to the new SEC marketing rules ; 2022 training and events calendar
Confronting ambiguities (Part I of a TBD number); Ah, my beloved CIPM®; 2022 training and events calendar
Getting Back to it; Accepting Things Perhaps We Shouldn’t; Composite Returns; Aggregate Method; Accruing fees; error Correction; Distributing GIPS Composite Reports; Asset Weighted Standard Deviation; 2022 training and events calendar
Not the year we planned for or anticipated; Householding accounts; The Barnette ratio; Upcoming Articles; 2021 training and events calendar
What a Hiatus; Net-of-Fee Returns…Challenges Aplenty; In-house Developed Return Methodologies; Mini-PMAR; Puzzle time; 2020 training and events calendar
A bit thin this month; An idea for employee retention; CIPM practice survey announcement; Book Review: How to Read and Why; Puzzle time; 2018 events
Recollections of a fun workshop “Down Under”; A better understanding of risk; I like to tweet; Long awaited attribution book; Puzzle time; 2017 events
Trying to keep up with GIPS: verifier independence; Puzzle time; Consulting in Sydney; Hurricane relief event; 2017 events; Never stop learning
Is midday or intraday cash flow treatment acceptable?; Book review: Ike and Dick; Keeping up with GIPS webinar; Puzzle time; 2017 events
Holding on for dear life; Quotation; Best practices for assessing a pension fund’s performance; GIPS® is pouring it on!; Puzzle time; 2017 events
Making sense out of the asset owners’ composite return; More from GIPS; Puzzle time; 2017 events
What happened to April?; Non-GIPS Verifications…An option for many!; book review: Prince Charles; GIPS Compliant? What do you show for new strategies?; GIPS 20/20 consultation paper released; Puzzle time; 2017 events
Timing is everything; An advisory fee conundrum; Travel tip; Puzzle time; 2017 events
Making sense out of the 36-month, ex-post, annualized standard deviation; Book review: The reporter who knew too much; GIPS XXX; Puzzle time; 2017 events
The Mystery of Excess Returns; The 75th Meeting of the Performance Measurement Forum; Puzzle Time; Event and Training Calendar
More on IRR; Expanded Role for IRR in GIPS; Puzzle Time; Event and Training Calendar
First Principles of performance measurement; GIPS Prep; Puzzle time; Event and Training calendar
A Fundamental rule of contribution (absolute attribution); Book review: “One Righteous Man”; Brief recap: GIPS annual conference; Puzzle time; Training updates
Is Information Ratio a risk-Adjusted Return?; On Achievement; Residuals and Geometric attribution; Book review: Towards an imperfect union; CIPM Program survey; Performance Measurement Boot Camp; Puzzle time
What happened to March, April & May?; New Guidance Statement; Risk-adjusted performance attribution; Jack Treynor; Inconsistency in rates of return; Puzzle time
NEW GIPS Guidance Statement; The Dynamics of Investment Performance and Risk Measurement; Performance Measurement…Not Everyone Does Get Right; GIPS Tips; Puzzle time; 2016 events Announced
Does it pay to have software certified?; A tip to overcome jetlag; Puzzle time; 2016 events Announced
Making sense of compounding; Puzzle time; Reader comments; Tips to keep your advertisements out of trouble from IA Watch
Store more, calculate less – Clarifying a few unclear points about the Internal Rate of Return; Congratulations CFA Institute on the 10th Anniversary of the CIPM program; So, What happened at the GIPS annual conference?; Puzzle time; upcoming events
Is it time to replace the term “discretionary?”; What do we agree on? As it turns out, not much; Puzzle time; upcoming events
Opinion is not knowledge; Automating our verification practice; TSG Reaches a milestone: 25 Years!; Puzzle time; Upcoming events; Letter to clients and friends
Crossing the Gap…How?; Puzzle time; Upcoming events and articles
Structuralism and GIPS; BI-SAM Webinar: Panel Discussion; Rimes Data Governance Conference; Puzzle time; Upcoming events
A bit more about time-weighting and money-weighting; Book Review; Puzzle time; Clients’ Corner: Laura Soehl; Upcoming Training and Conferences
A record setting event of epic proportions; Dispersion…are we calculating it correctly; Puzzle time;
ACQ Award 2014 for top US GIPS Consulting Firm; 2015 events and training calendar
December
The Cost of Benchmark Data – Things You Need To Know; Buy-Side Survey; Puzzle Time; Behind the Scenes at TSG: Steve Sobhi; Upcoming Trainings and Conferences
November
CIPM Reaches and Surpasses Milestone; TSG Receives Two Wealth and Money Management Awards; Nasdaq Closing Bell Ceremony; GIPS For Asset Owners Webinar; Performance and Risk Measurement Library; Bloomberg Radio Interview; Buy-Side Survey; Puzzle Time; Behind the Scenes at TSG: Susan Kneller; Upcoming Trainings and Conferences
October
Performance measurement books…just when you thought it was safe to stop collecting; Is it arithmetic vs. geometric attribution that we care about?; Puzzle time; Behind the scenes at TSG:Douglas Spaulding; CIPM Survey; Upcoming training and conferences
September
The start of a new year; The confusing ways of off benchmark bets; Extending attribution across time- survey results; Behind the scenes at TSG: Linda Burk; Puzzle time; Upcoming training and conferences
August
Multi-period Attribution confusion reigns;Book Review: The Math Book; No I didn’t invent money-weighted performance;
Clients’ Corner: Bernd Fischer, Ph.D.Puzzle time; Behind the scenes at TSG: Jaime Fowler Puerschner; Upcoming training and conferences.
July
Why rates of returns aren’t being given to prospective investors; In Memoriam; Does order dependence matter?; Puzzle time; Behind the scenes at TSG; Upcoming training and conferences.
June
Money manager runs afoul of the SEC; Hedging an internal rate of return; Puzzle time; Behind the scenes at TSG; Client’s corner: Bob Leaper; Upcoming training and conferences.
May
Annualized Standard Deviation; Puzzle Time; Behind the Scenes at TSG;
From our Readers;Client’s Corner: Mark Elliott; Event and Training Calendar
My GIPS Wish List, Part I
Got News To Share?
Puzzle Time
More On My GIPS Wish List
Feedback From A Client
TSG News
Puzzle Time
Late Breaking News
GIPS 2015…NOT!
Reporting Guidelines
Puzzle Time
Flopping Convention…Let’s Not Be Shy
It’s Survey Time Again…
Puzzle Time
Ten Years of Performance Perspectives Close Out
Top Trends in Performance Measurement
Asset Owners or Plan Sponsors
Survey Time
Puzzle Time
Client’s Corner
To Paraphrase Mark Twain, The Reports Of Performance Perspective’s Death Have Been Greatly Exaggerated
UAPS Is Moving Forward
Puzzle Time
Client’s Corner
Error Correction: How To Define Materiality
Puzzle Time
Client’s Corner
Mapping And The Art Of Attribution
Puzzle Time
From Our Readers
Client’s Corner
Annualizing For Periods Bracketed By Days, Other Than Month Or Yearends
Performance Measurement Forum Hosts 60th Meeting
GIPS News
Puzzle Time
Client’s Corner
More On Why Negative Sharpe Ratios May Make Sense
Trust: Is It All That It’s Cracked Up To Be?
Deriving Composite Net-Of-Fee Returns
From Our Readers
GIPS Portability
Why Don’t The Net Versus Gross Return Differences Not Equal The Fee?
Is The World Getting Riskier?
GIPS Help Has Gotten Easier
GIPS Isn’t The Only Standard In Town…
Why Security Level Attribution?
Investment Reporting Standards…Necessary, Or Not?
UAPS Moving Along
Supplementing Your GIPS Presentation
Documenting Your Risk Measures
Money Weighting Is Catching On!
Smoothing
10 Years Already?
Is The SEC Now Verifying The Verifiers?
The 3 C’s Of Performance Extended To Five
Puzzle Time
Fact of The Month
Ranking The Ways To Present Performance
What Is Happening To GIPS Protocol And Tradition?
Puzzle Time
Fact Of The Month
What’s A Reasonable Amount Of Dispersion?
Puzzle Time
How About Those Spreadsheets?
Best Practice…Defined…Or Perhaps, Not
From Our Readers
15th Anniversary Of JPM Is Worthy Of A Celebration
Common GIPS Mistakes & Misunderstandings
Animation Nation Has Arrived
Transaction Vs. Holdings Based Attribution
One Size Doesn’t Fit All When it Comes To Performance Measurement
Dealing With Changes In Return Methods
Risk…Why Can’t We All Just Get Along
One Size Doesn’t Fit All
Handling Fees Paid By Another Account Within The Family
Surveys That Will Take No More Than Five Minutes Of Your Time, But Provide Great Info!
The “PMAR Experience”
Holdings Vs. Transaction-Based Attribution: Does It Really Matter?
Avoiding Presentations
Let’s Show Equal-Weighted Returns, Too!
Client Reporting Standards…Necessary, Justified, Or What?
My Thoughts
A Guidance Statement You Need To Care About
Why We Don’t Like Examinations
From Our Readers…
Is It Acceptable To Net Same-Day Flows?
An Unaddressed Fundamental Issue
What To Do?
Five Ways You May Be Wasting Money In Performance Measurement
A Couple Other Money Wasters
Understanding Why We Do What We Do
Who’s The Client?
Going Out With A Bang!
Dealing With Zero Weights
Who’s The Client
Clients Or Customers…What Do We Have?
GIPS 2010 Update
Risk Monitoring/Management
Error Correction…One More Time?
GIPS 2010 Update
If It Looks Like A Duck, Walks Like A Duck, And Quacks Like A Duck…
Performance Is So Easy, Anyone Can Do It
Early Adoption Of GIPS 2010
When Daily Is Too Often
The CIPM Program
Automobile University
From Our Readers
Money Weighting Is Taking Off…Slowly, But Definitely Heading To New Heights!
Start-Of-Day, End of Day
Not So Obvious…
From Our Readers
Behold, I Have Prepared My Case. I Know That I Am In The Right
Liquidity Risk
The Best At All Times Is Our Goal
It’s Time To Abandon The Aggregate Method For Composite Returns
A New Head Of The CIPM Program
Using The Absolute Value In The Denominator For Modified Dietz
Negative Values Cause Other Issues For Us
From Our Readers
Linking Shorts Has Gotten Easier
Negative Sharpe Ratios
From Our Readers
The Changing World Of Notation
Being Comfortable Admitting One’s Ignorance
From Our Readers
Returns On Employee Stock Purchases
From Our Readers
Simply Not Getting It…Error Correction Guidance
Net Of Fee Returns…Frequency Of Applying The Fee
Hurdle Rates And Why You Shouldn’t Compound Them
From Our Readers
Academic Vs. Practitioner Writing
(And Speaking Of Words) The Word Of The Day
And Now, Speaking Of The Standards
Attribution For Plan Sponsors, Fund-Of-Fund Managers
Blueprints And Road Maps Vs. Mine Fields
Book Of The Month
The Rest Of All Bull
Performance Measurement Conference In A Down Market
The Five Things I Hate Most About GIPS 2010
Don’t Be So Negative
What’s Missing?
A Webinar Is Coming To A Theater (Computer Screen) Near You…
What Happens When The New Verifier Finds That The Old Verifier Didn’t Do Such A Good Job?
Further Information Is Available…
Something That Needs To Be Clarified
Market Recovery
Books As A Metaphor
Negative Sharpes
Verification Fraud
Verifier’s Corner
The Loss Of A Performance Measurement Guru
Cumulative Vs. Annualized
Madoff & The Beardstown Ladies
After After-Tax Is No More
Pardon Our Brevity
Verified, But Are You Really Compliant?
Risk Is Back In Style
Past Specific Recommendations
VAR…Are You Convinced That It’s Voodoo Yet?
Performance Measurement For Pension Funds
Multi-Currency Attribution
GIPS 2010
From Our Readers
Single Account Composites
GIPS 2010…The People Have Spoken
Confusion Caused By Time-Weighting
Standard Deviation And Falling Off The Fence
Four Months To Go, And Counting
To Template Or Not To Template
GIPS Examinations: Are They Really Necessary?
We Comply Because…
Questioning Conventional Wisdom
Judgment And The Standards
GIPS 2010
Getting A “Grip” On GIPS
From Our Readers
CIPC Comments On Verifiers Lack Of “Fieldwork”
Sampling
Factor Vs. Decision Based Attribution
UNSUPERVISED ASSETS…THERE’S MORE THAN MEETS THE EYES
BALANCED PORTFOLIOS…HOW TIMES CHANGE
ASSUMING IT’S RIGHT
ATTRIBUTION…ART OR SCIENCE?
CARVE-OUTS…WILL IT BE A PROBLEM?
SOCIÉTÉ GÉNÉRALE – A WAKE UP CALL?
MONEY-WEIGHTED ATTRIBUTION
IRR STANDARDS WORKING GROUP
REPORTING RETURNS AT THE AGGREGATE LEVEL
THE CONFUSING WORLD OF MODIFIED DIETZ
OUR NEXT BOOK PROJECT
LATE BREAKING NEWS
AMSTERDAM EC MEETING
GETTING THE DATA CLEAN
UNSUPERVISED ASSETS (and the income that comes from them)
WHAT DO YOU SHOW IF THERE’S NOTHING TO SHOW
FROM OUR READERS
THE END OF CARVE-OUTS?
IS VaR VOODOO?
THE BLACK SWAN
SO MANY MODELS…SO MUCH CONFUSION
CARVE-OUTS…I’M SO CONFUSED
BRINSON FACHLER VS. BRINSON-HOOD-BEEBOWER
RISK MEASUREMENT CHALLENGES
WHOSE RATIO IS IT?
ANNUALIZING STANDARD DEVIATIONS
FROM OUR READERS
TREYNOR RATIO MYSTERY, SOLVED
WHAT ABOUT NEGATIVE SHARPE RATIOS?
ANNUALIZING STANDARD DEVIATIONS
VERIFIER INDEPENDENCE
A “WHITE PAPER”
WHEN IS A PROSPECT A PROSPECT (FROM A GIPS PERSPECTIVE)
VERIFIER CORNER
MORE ON VERIFIER INDEPENDENCE
THANKS FROM FR. RAY
TSG NEWS
FROM OUR READERS
CROSSING INTO UNCHARTERED TERRITORY
PERSPECTIVES
GLOBAL FIXED INCOME ATTRIBUTION: IS ONE CURVE ENOUGH?
VERIFIER’S CORNER
GIPS 2010…SOME IDEAS GOOD, SOME NOT SO
SHOWING “STANDARD DEVIATION” ON A PRESENTATION… RISK MEASURE OR DISPERSION MEASURE?
EX ANTE RISK MODELS
VERIFIER CORNER
TSG NEWS
GETTING TO KNOW M-SQUARED A BIT BETTER
PMAR V…SHAPING UP TO BE QUITE AN EVENT!
FROM OUR READERS…
QUALITY OF VERIFICATIONS
VERIFYING THE VERIFIERS
CLOSING A COMPOSITE…HOW TO?
VERIFICATION – MINIMUM TIME PERIOD
GEOMETRIC OR ARITHMETIC ATTRIBUTION…YOUR PREFERENCE?
COMMUNITY SERVICE IN NEW ORLEANS
WHERE ARE THE ADVERTISING POLICE?
TIME-WEIGHTING OR MONEY-WEIGHTING? THE ANSWER: WHAT’S THE QUESTION?
SIGNIFICANT CASH FLOWS…AN EASY REQUIREMENT TO OVERLOOK
SHORT POSITIONS – KEEP THEM SHORT
FROM OUR READERS
WILL IT NEVER END?
ARITHMETIC VS. GEOMETRIC ATTRIBUTION…SHEDDING SOME LIGHT ON A COMPLEX TOPIC
COMMENTS FROM A READER
I OBJECT!
SPEAKING OF GIPS…
COMMENTS ON OUR JUNE NEWSLETTER
MINDING THE (MONEY-WEIGHTED) GAPS
SEC COMPLIANCE LETTER
READERS RESPOND
A QUANDARY? PERHAPS.
SEC COMPLIANCE ALERT
MY COMMENTS ON THE SEC’S STUDY
RISK MEASUREMENT
TERRA INCOGNITA
VERIFIER INDEPENDENCE
TERMINATING COMPOSITES
COMMENTS FROM READERS
ATTRIBUTION PRICE EFFECT
INTERACTION BLACK BOX
SIGNIFICANT VS. LARGE
THE CHEESE STANDS ALONE
A READER OFFERS AN ALTERNATIVE APPROACH FOR HANDLING MUTUAL FUNDS
CGIPS™ CERTIFICATION
COMPOSITE STANDARD DEVIATION
COMPOSITE BENCHMARKS
WHERE’S MY FALL ISSUE?
CGIPS™ SURPRISES
MIS-CLAIMS OF GIPS® COMPLIANCE
REVALUING PORTFOLIOS
COMMENTS FROM A READER
GOOD NEWS & BAD NEWS
ADVERTISING COMPLIANCE
WHEN CLOSE IS GOOD ENOUGH
BOOK RECOMMENDATION
QUOTING FROM A BOOK ON FRENCH ART
CHINESE TRANSLATION IS ON ITS WAY!
CGIPS…THE EXAM
COFFEE AND PERFORMANCE MEASUREMENT
GIPS…IS IT WORTH THE TIME AND MONEY?
CELEBRATE!
COPERNICUS, PTOLEMY, AND PERFORMANCE MEASUREMENT
ANNUALIZING RETURNS
MONEY-WEIGHTED BENCHMARKS
THE NAME GAME
AND SPEAKING OF CGIPS…
ANNUALIZING RETURNS (CONT’D)
SUBPORTFOLIO RETURNS
A FEW WORDS ON SHORTS
SOME PERSONAL REFLECTIONS
DOES MODIFIED DIETZ REALLY WORK ON A DAILY BASIS?
IT’S ALL GREEK TO ME
THE NAME GAME
COMMENTS FROM READERS
CORRECTION…EXPANSIONS
MORE ON INTERACTION
COMBINING INTERACTION SHIFTS THE CREDIT (OR BLAME)…A GOOD IDEA?
IT’S ALL GREEK TO ME
OUR FOURTH YEAR!
DOLLAR-WEIGHTED RETURNS AND MORNINGSTAR
HOW TO BE OFFENSIVE, IN ONE SIMPLE LESSON
WHAT TO INCLUDE…WHAT NOT TO.
ANNUALIZING RETURNS – STANDARDS OR GUIDANCE TO FOLLOW
9/11 TRIBUTE
ATTRIBUTION ON INTERACTION
“YOU HAD ME AT ‘HELLO’”
FROM A READER
WHEN ASSET-WEIGHTING WORKS (AND WHEN IT DOESN’T)
A QUESTION FROM A READER
A FACELIFT
WHEN ASSET WEIGHTING WORKS (AND WHEN IT DOESN’T) (PART II – MONEY WEIGHTING)
WHAT IS THE QUESTION?
ABUSIVE GAP CROSSINGS & ANNUALIZING WHEN THERE IS A GAP
MORE WORK COMING!
FROM OUR READERS
CIPM (FORMERLY KNOWN AS CGIPS) RESULTS
Attribution Survey
A Vote for Money-weighting
MANDATORY VERIFICATION – WILL IT EVER END?
IS DAILY ATTRIBUTION NECESSARY?
PERFORMANCE SOFTWARE VENDORS IN THE NEWS
WHAT DOES “TRADE DATE” MEAN?
MIND THE GAP
MONEY-WEIGHTING AT THE SUB-PORTFOLIO LEVEL
MINDING THE GAP
MORE ON MONEY-WEIGHTING
I PROMISED
DAVE’S BOOK CLUB
TIMING OF CASH FLOWS – ON A DAILY BASIS
THE TIMES, THEY ARE A CHANGIN’
THE IRR – HANDLING THE ITERATIONS
“BYE, BYE AIMR-PPS®, SAAJ, UK-IPS,…”
UNDERSTANDING THE STANDARDS’ PLACE IN THE UNIVERSE
ENGLISH, AN UNCOMMON LANGUAGE
DAVE’S BOOK CLUB
100 DAYS AND COUNTING
CGIPS PREPARATION CLASSES
GIPS™ – IT’S COMING TO A THEATER NEAR YOU
VERIFIER INDEPENDENCE
ANNUALIZATION OF ATTRIBUTION EFFECTS
BOOK OF THE MONTH
CLOSING OUT THE YEAR
Gold GIPS – what you don’t know may hurt you!
Treatment of Large Cash Flows
A new publishing venture
Can I get a witness?
Risk Management and Monitoring
Hedge funds and performance measurement
IPC Meeting in Brussels
A new CVG
Leverage & Derivatives
Date changes for new standards
Reporting as well as presenting?
“Gold” GIPS is here!
Commenting on “Gold” GIPS
Wrap Fee Accounts
Selecting a verifier
What happened to AIMR?
A new attribution effect?
Certification of Investment Performance Professionals
It’s official
Clarifying the differences
What’s in a name?
A single global standard
New subcommittees
TSG Selected Again to Train for AIMR (CFAI)!
Ending our first year!
Geometric Attribution and Interaction
More commentary on Modified Dietz
The 3 Cs
IPC Meeting – Washington D.C.
Allow me a moment to reflect
2005 – not to soon to start planning
It’s a sweep!
2005 – not to soon to start planning
New Guidance Statements
Draft Guidance Statement – Verifier Independence
Draft Guidance Statement – Leverage & Derivatives
Common areas of confusion – the standards
Certification Program
New Guidance Statements (continued)
Draft Guidance Statement – SMA/Wrap Fees
Draft Guidance Statement – Record Keeping
Draft Guidance Statement – Error Correction
Performance Attribution Survey
Internet Spam
Performance Attribution Survey
The Presentation Standards
Gold GIPS
Leverage and Derivatives
Software searches
Technology Survey
Fixed Income Attribution
The IPC
A little about politics
Interaction explained (briefly)
Mandatory verification
Is stock level attribution all it’s cracked up to be?
Pardon the interruption
Some clarity on carve-outs
The Performance Measurement Resource.