The Firm Pooled Fund Time-Weighted Return Report is the sixth section of the Global Investment Performance Standards (GIPS) 2020 Exposure Draft. Its focus is on Firms that manage Limited Distribution Pooled Funds and Broad Distribution Pooled Funds.

Under the 2010 GIPS Standards, Firms managing Pooled Funds were required to include the Pooled Funds in a Composite in order to meet the compliance requirements. But under the GIPS 2020, Firms are required to prepare GIPS Pooled Fund Reports for each fund they manage without the need to create specific Composites for each fund.

Firms are only required to include a Pooled Fund in an existing Composite if that Pooled Fund meets the Composite strategy. The goal of these GIPS Pooled Fund Report Standards is to harmonize the different presentation formats used for Pooled Funds across different regulatory jurisdictions whether these funds are regulated or not to promote easy comparison by Prospective Investors.

Most of the Standards in this section are the same or similar to that contained in the Composite Time-Weighted Return Report section but the number of required presentations and recommendations are significantly lower here and contains 7 Requirements and 13 Recommendations categorized under Presentation & Reporting and Disclosure sub-sections.

Firms that qualify to use the Standards here are Pooled Fund Managers managing any strategy and as always, the applicability principle still holds here.

Guidance Statements Consolidated

Here in this section too, specific Standards have been drawn from best practice guidance areas like the Guidance Statements and discussions. The Guidance Statements areas include:

1. Draft Guidance Statement on Benchmarks

2. Draft Guidance Statement on Use of Supplemental Information

3. Guidance Statement on Alternative Investment Strategies and Structures

4. Draft Guidance Statement on Risk

5. Guidance Statement on Real Estate

6. Guidance Statement on Private Equity

7. Guidance Statement on Error Correction

New Standards

The notable Standards in this section apart from those already specified under the Firm Composite Time Weighted Return Reports are:

The recommendation to present:

1. Pooled Fund Expense Ratio for each period presented (6.B.7).

2. Proprietary Assets as a percentage of Pooled Fund assets (6.B.8).

3. Percentage of Pooled Fund assets invested in Direct Investments for Pooled Fund of Funds (6.B.11).

4. Total Firm-wide uncalled Committed Capital if Firm has Committed Capital (6.B.12).

5. Total Fair Value of Firm’s co-investments related to the Pooled Fund (6.B.13).

The requirement to disclose:

1. the assets on which the Pooled Fund Net Returns are calculated if there is a partnership structure (6.C.6e).

2. the share class used to calculate Pooled Fund Net Returns if the fund has multiple share classes (6.C.6f).

3. What the Pooled Fund Inception Date represents based on whether it is a Limited Distribution Pooled Fund or Broad Distribution Pooled Fund (6.C.10).

Other Notable Changes

The Sunset Provision option for Disclosures mentioned in the Composite Time-Weighted Return Report post also applies here too and of the same or similar wording as outlined below:

1. All significant event for a minimum of one year and as long as relevant (6.C.14).

2. Changes to the name of Composite for at least one year and as long as relevant (6.C.18).

3. Changes to GIPS Composite Reports due to Material Error for a minimum of one year and as long as relevant (6.C.30).

5. Changes to the type of returns presented for a minimum of one year and as long as relevant (6.C.32).

Comments Requiring Feedback by GIPS Organization

The GIPS Organization requires your feedback on the following specific areas:

1. Whether Firms should be required to present Pooled Fund Time-Weighted Returns that are net of all fees and expenses (Comment #24).

2. Whether you agree (Comment #25):

a. to the elimination of the requirement for real estate portfolios to present component returns

b. to the elimination of the requirement for real estate portfolios to separately calculate component returns

c. that component returns should be recommended for all Composites and Pooled Funds presenting Time-Weighted Returns.

3. Whether the move to allow Firms to retire certain Disclosures after a period should be allowed and whether the identified sunset Disclosures have been correctly identified (Comment #26).

How to Send in Your Comments

We have made it easy for you to go through the comments in bite-sizes and to submit your responses quickly by completing comment survey forms covering the feedback areas requested and more. At the end of the commenting period (December 31, 2018), we will compile all the comments received and forward to the GIPS Organization for review.

Sign-up for free on our Composite Insider platform here to do so.

Alternatively, you can send your written responses to the GIPS Organization.

In the next post, we review the changes to Firm Composite Money-Weighted Return Report.