GIPS non - discretionary portflios

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cfa dude

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I am in a serious quandary with GIPS guys -
Q#1. Do you need to include the non - discretionary portfolios in the total firm assets or should u ignore them. I remember Schweser saying that that it is an error when one presentation includes them as well as for another that excluded them.
 
cfa dude Wrote:
——————————————————-
> I am in a serious quandary with GIPS guys -
>
> Q#1. Do you need to include the non -
> discretionary portfolios in the total firm assets
> or should u ignore them.
You MUST include non-discretionary portfolios in total firm assets (not composite).
0.A.3 TOTAL FIRM ASSETS MUST be the aggregate of the MARKET VALUE of all discretionary
and nondiscretionary assets under management within the defined FIRM. This includes both fee-paying and non-fee-paying assets.
> I remember Schweser
> saying that that it is an error when one
> presentation includes them as well as for another
> that excluded them.
I don’t understand what you are saying here.
 
Hi Sticky thanks for your response.
Practice Exams Book 1, Exam 2, morning session Q 8 has the following note:
#7. “Total Firm assets includes all discretionary and non-discretionary fee paying portfolios. ”
The answer expanation says:
#6. “All fee paying discretionary portflios must be included in atleast one composite, but non- discretionary portfolios may not be included.”
The question never said anything about includeing non-dis. portfolios in COMPOSITES. It only said that the total firm ASSETS includes non-d portfolios.
How does schweser assume that they have included non dis. portfolios in one of the composites?
 
cfa dude Wrote:
——————————————————-
> Hi Sticky thanks for your response.
>
> Practice Exams Book 1, Exam 2, morning session Q 8
> has the following note:
>
> #7. “Total Firm assets includes all discretionary
> and non-discretionary fee paying portfolios. ”
>
> The answer expanation says:
>
> #6. “All fee paying discretionary portflios must
> be included in atleast one composite, but non-
> discretionary portfolios may not be included.”
>
> The question never said anything about includeing
> non-dis. portfolios in COMPOSITES. It only said
> that the total firm ASSETS includes non-d
> portfolios.
>
> How does schweser assume that they have included
> non dis. portfolios in one of the composites?
I think Schweser is wrong.
#7 is still wrong, since Total firm assets should also include non-fee portfolios as well.
Solution #6 is not answering anything. I don’t see any assumption from question regarding that non dis. portfolios have been included in one of the composites.
I guess Schweser has got some typo here. May be they wanna say that column is Total (composite) asset.
 
sticky Wrote:
>
> I guess Schweser has got some typo here. May be
> they wanna say that column is Total (composite)
> asset.
Where ahve you seen such a column - “Total (composite) asset” - Have you seen it in any of the exams or CFAI?
I am really confused. So the bottomline is that we include all the assets (disc., non-disc., fee paying & non-fee paying) in total firm assets, but only discretionary fee paying in composite assets. We can include non-disc po. in comp assets with an accompanying disclosure.
Am I rite?
 
Hi there
You have to distniguish between discretionary and non-discretionary composites.
Discretionary composites include those portfolios for which the portfolio manager has management discretion. A portfolio may be non-discretionary if it has, for example, certain restrictions or is below the minimum asset size. A restriction could be that the portfolio manager has to ask the client before she makes certain stock purchases.
The sum of the assets of all discretionary and non-discretionary managed portfolios euqals the total assets under management under the firm.
Most GIPS-tool allocate the non-discretionary portfolio to a composite (non-discretionary composite or administration composite) in order to be able to calculate the assets incl. the assets of the non-discretionary portfolios, i.e. they sum the assets of the composites and substract double counting of assets. Maybe that’s why Schweser gave this answer.
 
cfa dude Wrote:
——————————————————-
> Where ahve you seen such a column - “Total
> (composite) asset” - Have you seen it in any of
> the exams or CFAI?
p.26, GIPS standard (the pdf). Column “Total composite assets”
> I am really confused. So the bottomline is that we
> include all the assets (disc., non-disc., fee
> paying & non-fee paying) in total firm assets,
yes
> but
> only discretionary fee paying in composite assets.
yes and you can choose to include non-fee, discretionary port in composite as well (disclosure on % req.)
> We can include non-disc po. in comp assets with an
> accompanying disclosure.
NO. anything non-discretionary should never touch a composite (but MUST be included in Total Firm asset)
 
^Well that is not exactly true. It should be clarified that a Non-Discretionary Portfolio can be in a composite, but it cannot be in a Marketable Composite under GIPS ;)
 
bigwilly Wrote:
——————————————————-
> ^Well that is not exactly true. It should be
> clarified that a Non-Discretionary Portfolio can
> be in a composite, but it cannot be in a
> Marketable Composite under GIPS ;)
What is this marketable composite about? Which LOS/text page/GIPS reference?
Well, if that’s something separate of course you can always include whatever you like, however I’ll just say that’s not part of GIPS.
 
It Might be int eh GIPS readings, I dont knwo. Don’t worry about it. A marketable composite in a snese is one that claims compliance with GIPS, being disretionary and all. It’s one that can be “marketed” under GIPS. I dont know if that’s their term for it or not, I’ll have to see if I can find some reference to it somewhere…
 
sticky Wrote:
>
> p.26, GIPS standard (the pdf). Column “Total
> composite assets”
>
Hey btw .. can you post the link for the pdf file?
 
got this reply from Schweser, regarding Q8, Exam 2, Vol 1:
“This has been identified as an error because all firm assets should include both discretionary and non-discretionary as per CFA curriculum. Thanks!”
 
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