GIPS Compliance

What does GIPS stand for? GIPS stands for Global Investment Performance Standards. While reading through the GIPS 2020 handbooks, it is easy for a firm to be apprehensive of becoming GIPS compliant. In my experiences with firms seeking information about becoming GIPS compliant, the common theme is:

"We’ve tried a few times to get started, but because our daily work functions always seem to get in the way, we never really make any progress. Trying to work a full day, and then do this project on top of everything else, is just too much."

Does this sound familiar? Performance Measurement Solutions exists to bring firms through the GIPS compliance process. My approach is more tactile in nature.  I just don't advise, but I get in the trenches with you to help your firm achieve its desired results.  

The Global Investment Performance Standards (GIPS®) are voluntary standards based on the principles of full disclosure and fair representation of investment performance results. The GIPS Standards are adopted by over 1700 firms, for prospective clients engaged in an evaluation of competing investment management firms' historical performance.  The history of the GIPS Standards is such that there were no common set of reporting principles. The Standards were created to assist prospective clients in assessing meaningful comparisons of accurate performance data. Utilizing a common set of guidelines, the prospective client can then proceed directly to a discussion of how the historical results were actually achieved, and better assist the prospective client in assessing the manager's investment management capabilities.

Released in June, 2019 with an effective January, 2020 the GIPS Standards were modified (GIPS 2020) to better accomodate alternative investment managers, private wealth firms and assets owners. In addition to expanding on many key technical concepts specific to firms and asset owners, it reformats the current standards to segregate sections specific to firms, asset owners and advertising guidelines.

The inherent goal of the GIPS standards is to foster the notion of 'self-regulation' on a global basis by the use of a voluntary set of standards so that a Firm can:

• Enable investors to directly compare track records from one firm to another.

• Provide enhanced prospective client confidence knowing the firm is following a set of standardized practices.

• A desire to follow best practices, improve firm-wide internal controls and promote firm-wide ethics and transparency.

• Provide assurances to potential regulating bodies by demonstrating a commitment to following industry best practices.

• Allow for greater competitive availablity against other investment management firms.

• Join an evergrowing list of GIPS compliant firms, worldworide.

If your firm is considering becoming GIPS compliant, the links below provide helpful basic GIPS compliance standards that any prospective GIPS compliant firm should be aware of prior to starting any GIPS engagement. The Basic Data Elements provided are here to help you understand the Fundamentals prior to starting any engagement. In addition, your Firm will need to know and understand all of the Recordkeeping Requirements associated with the GIPS Standards, in order to create a Performance Book of Record (PBOR).

If you are still considering becoming GIPS compliant, the main questions that a Firm typically want to know prior to any engagement are: How long will this take, and how much is this going to cost me? There are many variables that exist that can affect any engagements costs and time frames. Click the button below to learn more about the variables that can/will affect your costs and time frames associated with your Firm’s GIPS compliance process.

A GIPS compliant firm must comply with all applicable laws and regulations regarding the calculation and presentation of a firm's investment performance results. Click the link below to learn more about some of the basic GIPS requirements.

Verification of GIPS compliance asserts (sometimes called a GIPS certification) that the investment manager established policies that will ensure the firm remains GIPS compliant in the following areas: GIPS composite construction, pooled fund construction, GIPS performance calculation, GIPS performance presentation, and distribution of performance information. And further, a GIPS verification tests that these GIPS policies and procedures have been implemented firm-wide.