Money Management Institute Submits Comments to AIMR
On Proposed Guidance Statement on Money Manager Performance In Separately Managed Accounts

Washington, D.C., Oct. 30, 2002 -- Today The Money Management Institute submitted extensive comments to the Association for Investment Management Research (“AIMR”) addressing AIMR’s proposed Guidance Statement on how money managers report their prior performance in separately managed accounts (“SMAs”).  This issue area and the proposed Guidance Statement is extremely important to money manager firms who seek to be “AIMR Compliant,” a potential SEC regulatory matter for advertising materials distributed by money managers.  Further, compliance with AIMR performance reporting guidelines has become, over the years, an important threshold requirement for managers seeking selection by institutional investors. 

AIMR has sought comment on its proposal since releasing it earlier this year; the comment period closes on October 31. 

Highlights of MMI’s comment letter include: 

• MMI supports clarification of the AIMR—PPS requirements as they relate to Separately Managed Accounts but does not support the Guidance Statement in its current form.
• The Guidance Statement does not adequately reflect the nature of SMAs and the manner in which SMA programs operate and are marketed and therefore is not appropriate for adoption in its current form.
• SMAs and SMA programs are different from traditional institutional accounts in several respects, including recordkeeping practices and marketing, that bear directly on application of the AIMR—PPS requirements to SMAs.  It is important for AIMR to understand these differences fully before revising and finalizing the Guidance Statement.

• Many managers that participate in SMA programs have difficulties either gaining access to records maintained by SMA program sponsors or maintaining shadow (i.e., duplicate) accounting.  These factors emphasize the need for AIMR to adopt a more flexible approach to performance presentation requirements relating to SMAs.  Accordingly, AIMR should continue to permit certain exceptions and/or exclusions in its presentation requirements, subject to appropriate disclosure.  In light of the unique characteristics of SMAs, AIMR also should establish minimum standards with respect to shadow accounting.
• AIMR should exempt SMAs from the time-weighting requirement for daily cash flows, presently scheduled to be required in 2005.  Due to the recordkeeping and shadow accounting difficulties, the large number and relatively small average size of SMAs, daily cash flow accounting for performance calculation purposes would be unduly burdensome and provide little or no meaningful additional information as compared with the current assumed-mid-month approach to cash flows.
• AIMR needs to clarify and/or revise certain policies reflected in the Guidance Statement.  For example:
   
  • AIMR should permit gross-of-fees performance to be shown together with, and with equal prominence to, net performance.
  • AIMR should clarify that managers in SMA programs may link institutional and SMA performance under certain circumstances and with appropriate disclosure. 
  • AIMR should permit managers to present sponsor-specific performance to SMA program Sponsors and their employees, subject to appropriate disclosure.

•     July 1, 2003 is not an appropriate effective date for the Guidance Statement.  A significantly revised Guidance Statement should become effective no sooner than 18 months following its adoption by AIMR. 

To assist AIMR and work with it to explain MMI’s concerns, on October 15 the Institute’s Board of Governors appointed a Committee on AIMR Liaison, which is chaired by Janet Mariconti, Senior Vice President, Prudential Investments, and includes Scott Sipple, Managing Director, Alliance Capital, Bruce Aronow, Executive Vice President, Chief Operating and Financial Officer, Rorer Asset Management, Mark Pennington, Director of Private Advisory Services, Lord Abbett & Co., James Galbreath, CFA, Managing Director, NWQ Investment Management, and Ian MacEachern, CFA, Senior Vice President, Director of Managed Accounts, UBS PaineWebber, Inc. 

MMI’s Executive Director, Christopher Davis, commented: “We were pleased recently to have Karyn Vincent, Chair of the AIMR-PPS Implementation Committee, the relevant committee to consider revisions to the proposed Guidance Statement, speak at our annual fall meeting, Managed Account SolutionsSM, in New York on October 15 and we welcome an opportunity to maintain discussions with AIMR in the months ahead as we explain our comments and work with AIMR representatives.”

Notes:
The Money Management Institute (MMI) is the national organization for the managed account industry, representing portfolio manager firms and sponsors of investment consulting programs.  The MMI was created in 1997 to serve as a forum for the managed account industry’s leaders to address common concerns, discuss industry issues and work together to better serve investors. The Institute is the leading advocate for the industry on regulatory and legislative issues. MMI’s membership comprises firms that offer comprehensive financial consulting services to individual investors, foundations, retirement plans and trusts; related professional portfolio management firms, and firms that provide long term services to both sponsor and manager firms such as computer/technology firms.  www.moneyinstitute.com