The Input Data and Calculation Methodology section for Asset Owners is the ninth section of the GIPS 2020 Exposure Draft.
Just like the related Firm section, most of the Standards are the same or of similar construct so here again we outline the key Standards to note compared to the Firm Input Data and Calculation Methodology section one we reviewed earlier.
Key Different Standards
1. When calculating Since-Inception Money-Weighted Returns for Composites, Asset Owners are required to calculate either from inception or for the longest period that they have sufficient records (9.A.24a).
2. It is also recommended that Asset Owners should not include operating cash accounts that are not fully available for investment in Total Asset Owner Assets, Total Fund or Composite Assets (9.B.9) nor Returns (9.B.10).
Comments Requiring Feedback
Six comments require your feedback in this section:
1. The first one is with regards to the use of estimated transaction costs as mentioned in the Firm Input Data section review, that is whether it should be allowed and whether Asset Owners can determine if the estimated value is conservative (Comment #34).
2. The second is whether the use of preliminary estimated values be limited to certain assets and be limited to being guidance rather than a requirement (Comment #35).
3. The next is about the use of Daily External Cash Flows when calculating Money-Weighted Returns, specifically, whether it should be required from January 1, 2020, and whether the relaxation for periods prior to 1 January 2020 is appropriate (Comment #36).
4. The fourth pertains to the independent party valuation of Private Market Investments, that is whether you are in agreement with the requirement for external valuation, whether the once in every 12-month period was adequate and whether there were other types of valuations that should be allowed (Comment #37).
5. The fifth is whether the requirement for Asset Owners to present returns that include Side Pockets was ok (Comment #38).
6. The last is whether to recommend that Asset Owners use net-of-fees returns rather than gross-of-fees returns when calculating risk measures; and whether your answer will differ if performance-based fees or carried interest was involved (Comment #39).
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 to do so.
Alternatively, you can send your written responses to the GIPS Organization.
In the next post, we review the changes to Asset Owner Total Fund and Composite Maintenance.