POLICIES FOR VALUING PORTFOLIOS, CALCULATING PERFORMANCE, AND PREP...

7. Policies for valuing portfolios, calculating performance, and preparing compliant presentations

are available on request.

Samantha Eridge, CFA, is a prospective client who has requested more information regarding UpperQ’s

policy for calculating performance, and the firm has responded with the statement in Exhibit 2.

Exhibit 2

UpperQ Calculation Methodology

“UpperQ Investments AG calculates each portfolio’s time‐weighted rate of return

on a monthly basis. For periods beginning on or after January 1, 2010, portfolios

are valued when large cash flows occur, large being defined as comprising at least

5% of the estimated NAV of the fund at the time of the cash flow. In earlier periods,

monthly returns are calculated using the Modified Dietz method. Returns for longer

measurement periods are computed by geometrically linking the monthly returns.”

Eridge wished to demonstrate to her work colleagues how the different calculations mentioned in

Exhibit 2 are performed. She collates some information to perform a simple demonstration of the

methods contained in Exhibit 3.

Exhibit 3

Example Performance Calculation Data

March 31 portfolio value

$10,000,000

Contribution on March 12

$500,000

$10,500,000

Portfolio value on April 12

(including the $50,000 cash flow)

April 30 value

$10,000,000