The Global Investment Performance Standards (GIPS) are used by investment managers for creating performance presentations that ensure a fair representation and full disclosure of investment performance results. GIPS were created by the Chartered Financial Analyst Institute (CFA), (formerly known as the Association for Investment Management and Research (AIMR)) and governed by the GIPS Executive Committee. They are standardized guidelines for reporting the ability of an investment firm to make profits for investors. The principals were designed so potential investors could compare investment firms globally. The standards were originally introduced in 1999 but have been developed since 1980. GIPS compliance is not a legal requirement, however due to the high adoption rate in the industry, it has become a de facto standard for many types of funds.
GIPS in detail by Carl Bacon CIPM, Chairman, StatPro
Initially GIPS were born out of the frustration of pension fund trustees’ inability to differentiate between good and bad asset managers in the mid 1980s. Without standards it appeared that all managers were above average performers. Marketing departments of asset managers would “cherry pick” good performing accounts, choose beneficial time periods, hide important caveats in the small print and self-select return and valuation methodologies to ensure good but non-representative performance.
The advantages of a global standard for investors are obvious; they can select asset managers based on good quality information with a certain level of confidence that the numbers presented are a fair and honest representation of that firm’s track record.
The standards not only benefit prospective clients, but also good asset managers that are allowed to differentiate their performance, products and services on a level playing field.
Carl Bacon CIPM, Chairman, StatPro
Non-compliance with the standards may suggest a weaker commitment to ethical standards or weak internal controls insufficient to claim compliance. If performance measurement controls are not best practice that may be an indication that other controls within the firm are weak.
Helping you maintain GIPS compliance:
GIPS Composites from StatPro
Keep compliant with the Global Investment Performance Standards with StatPro’s multi-lingual and multi-currency tool for GIPS composites and account reporting solution.
- Access information relevant for GIPS and any further reporting or analysis needs, through the simple interface.
- Enhance productivity and speed up the verification process with the ability to automatically associate portfolios to accounts.
In addition to increasing your company’s credibility by complying with GIPS, StatPro’s application promotes greater operational cohesion. Failures in data control and operational risk are mitigated because StatPro’s technology streamlines the calculation, creation and maintenance of composites. The application also enables more efficient reporting to external auditors and clients with a robust library of report templates that clients can leverage for their reporting needs.
Global asset managers have trusted StatPro Composites to instil investor confidence in their services and drive their business growth since 1996. The product has enabled over 500 GIPS compliance verifications globally.
More information about GIPS from StatPro