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

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

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  • Matt_AnalystPrep
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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
    mincemeat23
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    Is it not C? Explanation would be helpful, thanks!!!

    Matt_AnalystPrep
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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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