Our firm manages private equity strategies and it is not clear how to provide a fee schedule appropriate to the composite. Fund-offunds do not have their ?own? fee schedule, what are we required to provide?
Within the fund-of-funds structure, there are two levels of fees. The fund-of-funds manager normally charges fees within the fund according to a schedule. This is the schedule thatmust be disclosed under the GIPS requirement. In addition, the underlying funds charge fees within their funds which vary according to the funds' strategy and size and include a performance element. These fees on underlying funds would be very difficult to separate out for a composite, but are fully taken into account in the fund-of-funds performance.
From time to time our firm does not have an appropriate composite that specifically meets the investment strategy a prospective client would like our firm to present. What information is our firm required to provide?
If the firm does nothave a composite appropriate to present to a prospective client, the firm is exemptfrom this requirement. However, the firm must disclose that it does not currently manage the specific style or strategy appropriate for the prospective client. The firm must be able to clearly demonstrate the strategies and investment products the firm currently manages and mustmake a listand description of all firm composites available to the prospective client. The firm is notprohibited from providing any information the prospective client specifically requests. Also, supplemental information can always be provided in addition to the firm's existing composites.
In the revised version of the GIPS Standards, it states that some disclosures may not be required in all situations. Please elaborate.
If a situation described in a disclosure requirement does not exist at a firm, or is not applicable to a specific composite, no disclosure is required. Notall disclosures are necessary for all firms, only those applicable specific to the firm. For example, the GIPS Standards require that firms disclose if a composite's name has changed. When preparing a presentation for a composite that has not had a name change, no disclosure is needed with regard to this provision. The firm does notneed to disclose that the composite has not changed names. No ?negative assurance? language is needed for nonapplicable disclosures.
We provide a compliant presentation to all prospective clients when we first meet with them. However, we often are in discussions with large prospective clients for many months, if not years. We send them updated composite information quarterly. Must the quarterly updates include all required disclosures?
No. Provided the firm has given a compliant presentation to a prospective client within the past 12 months, the firm may present additional information that does not meet the requirements of the GIPS Standards. A reference should be made that a composite presentation in compliance with the GIPS Standards is available upon request. If the prospective client is receiving investment results for the first time, the performance mustmeet the requirements of the Standards.