Cipm Principles Syllabus | Investment Management | Performance Appraisal

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The CIPM Program 2011 Principles Study Sessions Ethical and Professional Standards (Study Session I) The candidate should be able to summarize the importance of ethical standards to the investment profession, demonstrate ethically sound reasoning, and identify and explain the responsibilities required by the CIPM Association Code of Ethics and Standards of Professional Conduct. Study Session I: Ethical and Professional Standards .......................................................... 2  Perfo
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  The CIPM Program2011 Principles Study SessionsEthical and Professional Standards (Study Session I) The candidate should be able to summarize the importance of ethical standards to theinvestment profession, demonstrate ethically sound reasoning, and identify and explainthe responsibilities required by the CIPM Association Code of Ethics and Standards of Professional Conduct.Study Session I: Ethical and Professional Standards .......................................................... 2   Performance Evaluation: Measurement, Attribution, and Appraisal (Study SessionsII–V) The candidate should be able to calculate rates of return; explain and apply analyticaltechniques to determine the sources of returns relative to appropriate benchmarks; andcalculate and interpret basic risk measures.Study Session II: Performance Evaluation: Measurement and Benchmark Analysis ........ 4   Study Session III: Performance Evaluation: Attribution .................................................... 7   Study Session IV: Performance Evaluation: Portfolio Characteristics Analysis ................ 9   Study Session V: Performance Evaluation: Appraisal ...................................................... 10   Global Investment Performance Standards (GIPS ® ) (Study Sessions VI–X) The candidate should be able to explain the need for global performance presentationstandards, outline the role of the GIPS Executive Committee, and state, explain, andapply the provisions of the GIPS standards.Study Session VI: GIPS Standards: Foundations ............................................................. 12   Study Session VII: GIPS Standards: Calculation Methodology ....................................... 14   Study Session VIII: GIPS Standards: Composite Construction ....................................... 16   Study Session IX: GIPS Standards: Disclosure, Presentation and Reporting .................. 18   Study Session X: GIPS Standards: Advertising Guidelines ............................................. 19   We may provide a reading and indicate those parts that are not required as “optional.”The CIPM exam is based only on the required segments, and the optional segments areprovided only when they might help you better understand the required segments (byseeing the required material in its full context). In the study sessions pertaining to GIPS,the readings may contain a strikethrough for those portions of the reading that are not   required for the Principles level. (The strikethrough material is covered at the Expertlevel.)© CFA Institute 2010 Page 1 of 19  Study Session I: Ethical and Professional Standards Purpose of the Study SessionThe readings in this study session set forth the provisions of the CIPM Association Codeof Ethics (the Code) and Standards of Professional Conduct (the Standards) and illustratethe practical application of the Code and Standards in investment practice.CIPM candidates and members of the CIPM Association are subject to the Code andStandards. The Code articulates the ethical principles governing the investmentprofession. The Standards set forth the responsibilities of covered persons in the areas of professionalism; integrity of capital markets; duties to clients; duties to employers;investment analysis, recommendations, and action; conflicts of interest; andresponsibilities as a CIPM Association member or CIPM candidate.Note: The CIPM Association Code and Standards are based on the CFA Institute Codeof Ethics and CFA Institute Standards of Professional Conduct.This study session makes use of the 10th edition of the CFA Institute Standards of Practice Handbook (SOPH) to focus on applications of the Code and Standards andrecommended procedures for complying with them. SOPH states in the Preface that it “isintended for a diverse and global audience” (v). Although the guidance,recommendations, and applications provided in SOPH supplement the CFA InstituteCode and Standards, this reading can be used in parallel with the CIPM Association Codeand Standards as well. Recognizing that the following list is not exhaustive, the followingexchanges may help with your understanding the reading: SOPH Terminology CIPM Association Code & StandardsApplication CFA Institute  CIPM AssociationCFA   CIPMMembers and Membership   Pertains to the CIPM AssociationCandidates and Candidacy  Pertains to the CIPM programDesignation   Pertains to the Certificate in InvestmentPerformance Measurement (CIPM) designationExams  CIPM examsCFA logo/marks   CIPM logo/marks (“Certificate in InvestmentPerformance Measurement” or “CIPM”)   Charter/Charterholders   Certificate/Certificants or Certificate Holders© CFA Institute 2010 Page 2 of 19  Reading Assignments1.   CIPM Association Code of Ethics and Standards of Professional   Conduct (CFAInstitute 2010)2.   Standards of Practice Handbook, 10 th ed., (CFA Institute 2010)Learning Outcome StatementsThe candidate should be able to:A.   characterize the investment profession;B.   explain the relationship between ethics and the law;C.   state and explain the provisions of the CIPM Association Code of Ethics   andStandards of Professional Conduct; andD.   determine potential violations of the CIPM Association Code of Ethics and Standards   of Professional Conduct and select appropriate preventive or corrective actions.© CFA Institute 2010 Page 3 of 19  Study Session II: Performance Evaluation: Measurement and Benchmark Analysis Purpose of the Study SessionThe three components of performance evaluation are performance measurement,attribution, and appraisal.Fund sponsors use the techniques of performance evaluation to assess the fund’sinvestment results relative to its financial objectives and to determine the sources of returns. Investment managers apply the techniques of performance evaluation to assessthe effectiveness of various elements of their research and decision-making processes.For both fund sponsors and investment managers, performance evaluation can be aproductive feedback and control mechanism.Performance measurement—the calculation of rates of return—quantifies an account’sinvestment results. The first reading introduces the concept of total return and discussesthe difference between money-weighted and time-weighted rates of return. It alsoexplains how to calculate time-weighted returns for a single period, link returns acrossmultiple periods, and annualize returns.Performance evaluation is a relative concept, and investment results are accordinglyappraised in comparison to a benchmark. The first reading also introduces the concept of a benchmark, sets forth the properties of a valid benchmark, discusses and critiquesvarious types of benchmarks, and presents tests of benchmark quality.After-tax performance measurement is rendered difficult by the diversity and complexityof tax codes, differences in individuals’ tax situations, the lack of commercially availablebenchmarks, and the uncertain timing and amount of future tax liabilities. Based uponprovisions of the GIPS Guidance Statement for Country-Specific Taxation Issues, thesecond reading discusses two approaches to after-tax performance measurement.Portfolio mandates are often style-specific. For example, a plan sponsor may hire aninvestment manager specifically to invest in large capitalization value stocks. Analyzinginvestment styles and appraising results in comparison with style-appropriate benchmark returns has become an integral part of performance evaluation. The third readingintroduces the concept of investment style, traces the evolution of style investing, andpresents returns-based and holdings-based approaches to portfolio classification. Note :Candidates are required to read only pages 62–74 of the Siegel monograph, up to thesection subheaded “Index Construction and Trade-Offs”.© CFA Institute 2010 Page 4 of 19
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