GIPS Basic Data Elements

In order to be fully compliant with the GIPS Standards, certain 'basic' data elements are needed.  This is not an all-inclusive list, but contains basic roadblocks that I’ve seen from time to time.  Prior to beginning any GIPS compliance engagement, I typically send out this list to prospective clients to ensure the firm can meet the GIPS minimum requirements.  Don't stress, I'm here to help!

A GIPS firm is required to initially present, at a minimum, five years of annual investment performance that is compliant with the GIPS standards. If the firm or the composite has been in existence less than five years, the firm must present performance since the firm’s inception or the composite inception date.

To be able to comply with the GIPS standards, firms must be defined as an investment firm, subsidiary, or division held out to clients or prospective clients as a distinct business entity.  The firm needs to be a registered RIA that manages money on behalf of clients.

Firms must not link simulated or model portfolios with actual composite performance.

Firms can link non-GIPS compliant performance to its GIPS compliant performance provided that return information AFTER 1/1/2000 is fully GIPS compliant information, and, the firm discloses the information that is non-compliant.

Firms must not present non-GIPS- compliant performance for periods ending on or after 1 January 2006 for Private Equity composites.  For periods ending prior to 1 January 2006, firms may present non-GIPS-compliant performance.

For Real Estate assets, firms must not link non-GIPS-compliant performance for periods beginning on or after 1 January 2006 to their GIPS-compliant performance. Firms may link non-GIPS- compliant performance to their GIPS-compliant performance provided that only GIPS-compliant performance is presented for periods  beginning on or after 1 January 2006.

All data necessary to support all account level & composite level returns needs to exist for periods starting 1/1/2000 to present, including closed accounts.

Documentation needs to exist for all client-related information, on all accounts (even closed) such as contracts, IPS, termination letters, etc.

Monthly Gross of Fees returns for each account in the composite.

Month-end market values consistently applied (accrual basis for Fixed Income) for each account in the composite.

Month end holdings, security transactions with dates, cash flows and dates.

Receipts and disbursements of assets (if any) and dates.

Dividends/interest and dates

Signed and dated investment policy statements that provide the following information:

1. Proof that the account is to be invested in specific strategy

2. Investment restrictions on the account

3. Fee rate assigned to the portfolio (or client invoices)

4. Inception date

5. Discretionary status

6. Client investment objectives, etc.

7. If the account has been closed, the account termination letter with the termination date is needed

Reconciliation records

Custodial statements

For periods beginning on or after 1/1/2011, total GIPS firm AUM must be the aggregate fair value (not cost or book value) of all discretionary and non-discretionary assets managed by the firm for which a firm has investment management responsibility. This includes both GIPS fee-paying and GIPS non-fee-paying accounts.

For periods prior to 1/1/2011, total GIPS firm AUM must be the aggregate of the market value of all discretionary and non-discretionary assets under management within the GIPS defined firm, for which a firm has investment management responsibility.

When calculating money-weighted returns, the GIPS firm must value portfolios at least annually and as of the period end for any period for which performance is calculated.

If the firm uses the last available historical price or preliminary, estimated value as fair value, the firm must: Consider it to be the best approximation of the current fair value and assess the difference between the approximation and final value and the effect on composite or pooled fund assets, total firm assets, and performance, and also make any adjustments when the final value is received.

When calculating time-weighted returns for portfolios that are included in GIPS composites, all portfolios except private market investment portfolios must be valued:

• For periods prior to 1/1/2001, portfolios must be valued at least quarterly.

• For periods on or after 1/1/2001, at least monthly.

• For periods on or after 1/1/2010, firms must value portfolios as of month end (or last business day of the month).

• For periods on/after 1/1/2010, on the date of all large cash flows. The firm must define large cash flow for each composite to determine when portfolios in that composite must be valued.

When calculating time-weighted returns for pooled funds that are not included in a composite, pooled funds must be valued:

• At least annually.

• As of the calendar or fiscal year end.

• Whenever there are subscriptions to or redemptions from the pooled fund.

• As of the period end for any period for which performance is calculated.

Accrual accounting must be used for fixed income securities, and any other investment that earns interest income.

GIPS Composites must include new portfolios on a timely and consistent basis after each portfolio comes under management, based on your GIPS composite inclusion rules.

Terminated portfolios must be included in the historical performance of the GIPS composite up to the last full measurement period that each portfolio was under management.

Portfolios must not be switched from one composite to another unless documented changes to a portfolio's investment mandate, objective, or strategy or the redefinition of the GIPS composite makes it appropriate.  The historical performance of the portfolio must remain with the original composite.

If the GIPS firm sets a minimum asset level for portfolios to be included in a composite the firm must not include portfolios below the minimum asset level in that composite.  Any changes to a composite-specific minimum asset level must not be applied retroactively.

All actual, fee-paying, GIPS discretionary portfolios and pooled funds must be included in at least one composite if they meet a GIPS composite definition. The firm is not required to create a composite that only includes one or more pooled funds unless the firm offers the strategy as a segregated account.

Non-fee paying discretionary portfolios may be included in a composite (with disclosure), non-discretionary portfolios MAY not.

GIPS Composites can only include actual accounts with assets actually managed by the firm.

GIPS Composites must be defined according to investment mandate, objective, or strategy. Composites must include all portfolios, including segregated accounts and pooled funds, that meet the appropriate GIPS composite definition.

Any GIPS carve-out included in a composite must include cash and any related income. Cash may be accounted for separately or allocated synthetically to the carve-out on a timely and consistent basis.

Have any portfolio accounting system conversions occurred during the time frame that you wish to claim GIPS compliance?  Have any track records been ported over to your firm for the time frame you wish to claim GIPS compliance?

Trade date accounting must be used.

Total Returns must be used.  Total return must be inclusive of dividends and other income factored into the market values. Dividends and interest have to HIT the account, first, and then can be either reinvested or withdrawn.

Returns from cash and cash equivalents must be included in all return calculations, even if the firm does not control the specific cash investment(s).

Security flows should have flow values associated with both the In/out flow and not be treated as $0.00 for share accounting purposes.