Which of the following disclosures must a firm make in order to be in compliance with AIMR-PPS?
I. The effective date of firm compliance.
II. A measure of the dispersion of individual component portfolio returns around the aggregate composite return.
III. The existence of a minimum asset size below which portfolios are excluded from the composite.
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A. B. C. D.A
All of these are mandatory disclosures under AIMR-PPS.
AIMR-PPS, which stands for Association for Investment Management and Research Performance Presentation Standards, is a set of guidelines and standards for reporting and presenting investment performance. In order to be in compliance with AIMR-PPS, a firm must make certain disclosures. Let's go through each statement and determine which disclosures are required.
I. The effective date of firm compliance. This statement refers to the disclosure of the date from which the firm is in compliance with AIMR-PPS. This information is important for investors and clients to understand when the firm started following the performance presentation standards. Disclosing the effective date of compliance helps ensure transparency and consistency in performance reporting. Therefore, this disclosure is required to be in compliance with AIMR-PPS.
II. A measure of the dispersion of individual component portfolio returns around the aggregate composite return. This statement refers to the measurement of dispersion or variability in returns among the individual portfolios that make up the composite return. Dispersion provides insight into the consistency of returns across different portfolios within the composite. By disclosing this information, the firm provides transparency about the potential variability in performance within the composite. Therefore, this disclosure is also required to be in compliance with AIMR-PPS.
III. The existence of a minimum asset size below which portfolios are excluded from the composite. This statement refers to the disclosure of a minimum asset size threshold, below which portfolios are not included in the composite return calculation. This information is important as it indicates that smaller portfolios may have different characteristics or performance drivers compared to the included portfolios. By excluding these smaller portfolios, the firm ensures that the composite return accurately reflects the performance of larger portfolios. Therefore, this disclosure is required to be in compliance with AIMR-PPS.
Based on the above analysis, the required disclosures to be in compliance with AIMR-PPS are I, II, and III. Therefore, the correct answer is:
A. I, II, and III.