Portfolio Risk Management

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Portfolio Risk Management

Global investment performance standards
Key Assignment Draft

Global investment performance standards (GIPS) require that the portfolio management companies create the following 3 composites of all fund portfolios under their management:

  1. Constructing Composites I: Define discretion
  2. Constructing Composites II: Defining investment strategies
  3. Constructing Composites III: Including and excluding portfolios

In a paper of 1,000–1,200 words, discuss each of these 3 composites, and explain what is meant by each descriptive term.

Answer

Introduction

Global investment performance standards involve the ethical morals used by investment managers for forming performance presentations that guarantee fair image and full revelation of investment performance. Chartered Financial Analyst Institute created GIPS and governed by the Executive Committee of GIPS. They involve the regular strategies for reporting the capability of the investment companies to make profits for their investors. Discretion is the limitations given by the firm’s clients preventing the company from implementing its strategies. To achieve GIPS compliance standards; investment advisor should define the firm first in GIPS contest. For investments in stock and bonds, the ability of the firm to implement its strategies is the discretion. Restrictions imposition by the clients hinders the firm from performing certain actions as originally intended. This would cause a portion of the account or the whole…

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