CFA Level II ExamEthical and Professional StandardsEasy
An investment firm, 'Capital Growth Advisors,' is preparing to claim GIPS compliance for the first time. The firm has identified its 'Global Balanced' composite, which includes all fee-paying discretionary portfolios following that strategy. The firm has performance data going back to 2010. According to GIPS, what is the minimum number of years of GIPS-compliant performance that Capital Growth Advisors must present for its 'Global Balanced' composite?
- A15 years
- B20 years
- C10 years
- D5 years
Show answer & explanationAnswer & explanation
Correct answer: D. 5 years
According to GIPS, a firm must present a minimum of five years of GIPS-compliant performance. If the composite or firm has been in existence for less than five years, then it must present performance since the composite's or firm's inception. After the initial five years, the firm must present an additional year of performance each year, up to a minimum of 10 years.
Why the other options are wrong
- A. This is beyond the initial minimum requirement.
- B. This is beyond the initial minimum requirement.
- C. Ten years is the target, but five is the initial minimum.
GIPS Performance Presentation Minimums
GIPS requires firms to present a minimum of five years of GIPS-compliant performance, building up to a minimum of 10 years over time.
- Initial minimum: 5 years.
- Add 1 year annually until 10 years are presented.
- If composite/firm less than 5 years old, present since inception.
Memory trick: GIPS: Five to Ten, Fairly Shown.