Which of the following are mandatory disclosure requirements under AIMR-PPS?
I. The number of portfolios and assets in each composite.
II. The fees deducted or not deducted from the calculations of returns.
III. The volatility of the aggregate composite return.
IV. Benchmarks that the composites are expected to track.
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A. B. C. D.B
(III) & (IV) are recommended disclosures while (I) and (II) are mandatory.
Under the AIMR-PPS (Association for Investment Management and Research-Performance Presentation Standards), there are several mandatory disclosure requirements that investment firms must adhere to. Let's go through each option and determine which ones are part of the mandatory disclosure requirements:
I. The number of portfolios and assets in each composite. This statement refers to the requirement of disclosing the number of portfolios and assets that are included in each composite. Composites are groups of portfolios with similar investment strategies, objectives, or mandates. By disclosing this information, investment firms provide transparency about the composition of their composites, allowing investors to understand the underlying portfolios and assets used to calculate the composite's performance. Therefore, option I is a mandatory disclosure requirement.
II. The fees deducted or not deducted from the calculations of returns. This statement pertains to the requirement of disclosing the fees that are deducted or not deducted from the calculations of returns. Investment firms typically charge fees for managing portfolios, and these fees can impact the reported returns. It is crucial for investors to understand the impact of fees on investment performance. By disclosing whether the fees are deducted or not deducted from returns, investment firms ensure transparency in reporting performance. Therefore, option II is also a mandatory disclosure requirement.
III. The volatility of the aggregate composite return. Volatility refers to the degree of variation or dispersion in the returns of a composite. While it is important to disclose the volatility of composite returns to provide insights into the risk associated with the investment strategy, the AIMR-PPS does not specifically mandate the disclosure of volatility. Therefore, option III is not a mandatory disclosure requirement.
IV. Benchmarks that the composites are expected to track. Benchmarking is an essential aspect of performance evaluation. By comparing the performance of a composite against an appropriate benchmark, investors can assess the investment manager's ability to achieve the stated objectives. The AIMR-PPS recognizes the importance of benchmarks and requires investment firms to disclose the benchmarks that the composites are expected to track. Therefore, option IV is a mandatory disclosure requirement.
Based on the above analysis, the correct answer is:
C. I, II and III only