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CFA Level 1 Question of the Week – Ethical and Professional Standards

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    • Avatar of Matt_AnalystPrepMatt_AnalystPrep
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        • CFA Charterholder
        12 May 2019 at 11:14 am
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        The Since Inception Internal Rate of Return (SI-IRR) for real estate closed-end fund composites is recommended to be calculated using the:

        • A. Daily cash flows
        • B. Earnings before tax
        • C. Earnings before depreciation and tax
      • Avatar of mincemeat23mincemeat23
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          • CFA Level 1
          15 May 2019 at 3:37 am
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          Is it not C? Explanation would be helpful, thanks!!!

        • Avatar of Matt_AnalystPrepMatt_AnalystPrep
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            • CFA Charterholder
            20 May 2019 at 6:07 am
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            The correct answer is A.
            Calculating performance using daily cash flows provides the most accuracy in all performance calculations, including the SI-IRR. For private equity investments, the GIPS standards, therefore, require daily cash flows for periods after 1 January 2011 and recommend daily cash flows for periods prior to 1 January 2011. For periods ending prior to 1 January 2011, the SI-IRR must be calculated using either daily or monthly cash flows.

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