Investment performance reporting and presentation are critical for building trust and transparency in the asset management industry. The Global Investment Performance Standards (GIPS®) have become the gold standard for best practices, offering a globally recognized framework for presenting performance results. In this article, we’ll explore what GIPS Standards are, why they matter, and how compliance can benefit asset managers.
The GIPS Standards were
established to provide investment managers with a set of
voluntary, ethical standards recognized worldwide. Compliance with
GIPS Standards enhances the credibility of a firm’s performance
track record, fosters investor confidence, and improves the
ability to attract new investments. For investment vehicles not
subject to formal audits, GIPS Standards offer guiding principles
that ensure fair and consistent presentation of performance and
risk metrics, ultimately boosting data quality and uniformity.
In today’s evolving investment management landscape,
GIPS compliance is a powerful
competitive advantage. By adhering to these standards, asset
managers demonstrate their commitment to transparency and
excellence, positioning themselves strongly in the market.
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The CFA Institute introduced GIPS in 2000 to address the need for international standards in investment performance reporting. Over the years, the standards have evolved to remain relevant across all asset classes and investment managers. The most recent update, the 2020 GIPS Standards, became effective on January 1, 2020, marking a significant milestone in ensuring global applicability and relevance. 2
The 2020 update introduced a more nuanced approach to managing investment portfolios under GIPS. It refined the treatment of pooled funds and broadened the standards' applicability to all asset managers and asset owners. The new structure consists of three core documents:
This updated framework ensures that GIPS Standards remain adaptable to the changing needs of the investment management industry. 3To claim compliance with GIPS Standards, firms must adhere to specific requirements related to investment performance presentations. This includes presenting segregated accounts in composites, which reflect the weighted average performance of all portfolios managed under a particular strategy. The standards focus on key areas such as:
Verification is a critical aspect of GIPS compliance. It provides
additional credibility by confirming that a firm’s policies and
procedures align with GIPS requirements. Verification reinforces
the principles of
full disclosure and
fair representation, while
also enhancing the knowledge and consistency of a firm's
performance measurement team. Verified firms often benefit from
improved internal processes and a stronger market position.
EVIV Group is a leading
provider of GIPS verification services, helping firms navigate the
complexities of the verification process.
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The
Global Investment Performance Standards (GIPS®)
are essential for asset managers aiming to build trust,
transparency, and credibility in their performance reporting. By
adhering to GIPS Standards, firms can differentiate themselves in
a competitive market, attract more investors, and demonstrate
their commitment to ethical and transparent practices.
For firms seeking expert guidance,
EVIV Group is the vendor of
choice, offering unparalleled expertise in GIPS compliance and
verification.