RIA Performance Reporting & Benchmarking

Question 1

What does GIPS stand for in the context of investment performance reporting?

Accepted Answer

Global Investment Performance Standards

Answer

General Investment Policy Standards

Answer

Government Investment Portfolio Specifications

Answer

Gross Income Performance Statements

Question 2

Which return calculation method is required by GIPS because it eliminates the distorting effects of external cash flows?

Accepted Answer

Time-weighted rate of return

Answer

Money-weighted rate of return

Answer

Dollar-weighted rate of return

Answer

Annualized holding period return

Question 3

In investment management, what is a benchmark primarily used for?

Accepted Answer

Comparing and evaluating a portfolio manager's performance

Answer

Setting the minimum acceptable portfolio return

Answer

Determining the risk-free rate for the Sharpe ratio

Answer

Calculating the required rate of return for clients

Question 4

Under GIPS, what is a 'composite'?

Accepted Answer

An aggregation of all discretionary portfolios with similar investment mandates

Answer

A blended benchmark made from multiple indices

Answer

A summary report combining all client accounts

Answer

A calculation method for combining gross and net returns

Question 5

Which performance metric measures risk-adjusted excess return per unit of total risk (standard deviation)?

Accepted Answer

Sharpe ratio

Answer

Treynor ratio

Answer

Jensen's alpha

Answer

Information ratio

Question 6

What is the primary purpose of an investment advisor claiming GIPS compliance?

Accepted Answer

To provide clients and prospects with a full and fair presentation of performance history

Answer

To qualify for SEC registration exemption

Answer

To eliminate the need for an independent audit

Answer

To guarantee superior future returns

Question 7

An RIA calculates a composite return of 12% gross of fees and a benchmark return of 10%. What is the portfolio's gross value-added (active return)?

Accepted Answer

2%

Answer

10%

Answer

12%

Answer

22%