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Selecting a Verifier
/in Resources/by Janice KitzmanIf you haven’t yet evaluated your current verifier, the CFA Institute’s verification questionnaire offers valuable questions for your consideration. In addition to the CFA Institute’s questionnaire, this article provides supplementary insights that may prove beneficial as you evaluate your existing verification firm or search for a new one.
Hypothetical Performance Risk Alerts
/in Resources/by Kim CashThese past few weeks, the SEC has charged 10 firms with violating the New Marketing Rule (NMR), and each of the firms charged share a common error: advertising hypothetical performance without establishing and implementing the required internal “policies and procedures reasonably designed to ensure that the performance is relevant to the likely financial situation and investment objectives of the intended audience.”
Roads? Where we’re going, we don’t need roads!
/in Resources/by Janice KitzmanAs we have been working through GIPS verification and SEC Marketing Rule transformations, we are noticing that there are still some misconceptions about what is needed for grouping accounts.
A Summer Must-Read: the Latest SEC Risk Alert on the Marketing Rule
/in Resources/by Kim CashThe June 8 SEC Risk Alert isn’t a window into findings-to-date, nor a much-anticipated list of best practices offering clarification. It is a solid overview of areas at your firm likely impacted by the new Marketing Rule (NMR).
From Team Performance to Investment Returns: Ted Lasso and GIPS Standards
/in Resources/by Janice KitzmanWhile it may seem that Ted Lasso and the Global Investment Performance Standards (GIPS®) have nothing in common, we found important similarities between this feel-good show and the GIPS Standards.
ESG Disclosure Standards
/in Resources/by Kim CashCFA Institute released third-party assurance standards for firms claiming compliance with its Global ESG Disclosure Standards for Investment Products (the “Standards”). As controversy over the proposed SEC ESG Rule grows, it’s important to understand the CFA Institute’s voluntary framework and assess the benefits of voluntary compliance and assurance on a firm’s investment products, as well as the similarities and differences in proposed regulations.
Year-End Marketing Material Updates
/in Resources/by Kim CashRIAs across the country are preparing year-end 2022 performance presentations, and for most GIPS compliant firms, it’s time to update annual performance on your GIPS Reports. Or is it? Below are four timely Q&As as we kick-off annual verifications and performance examinations.
Exploring and Documenting Consistent Calculation Methodologies
/in Resources/by Kim CashExploring and Documenting Consistent Investment Performance Calculation Methodologies When trying to understand the limits of the SEC Marketing Rules requirements for consistent related account performance calculation methodologies, advice circulating that […]
SEC Marketing Rule – Hypothetical & Extracted Performance
/in Featured Resources, Resources/by Kim CashHypothetical performance will be prohibited beginning November 4, 2022, unless the advisor takes specific steps to address its potentially misleading nature. The SEC’s goal with this portion of the rule is to ensure that advertisements containing hypothetical performance are only distributed to investors who have the financial expertise and resources to interpret the data and understand the risks and limitations of these types of presentations.
SEC Marketing Rule – Prescribed Time Periods
/in Featured Resources, Resources/by Kim CashBeginning November 4, 2022, all performance presented in an SEC-registrant’s marketing materials must include the additional time period requirements. One-, five- and ten-year net performance must be included in marketing materials when presenting performance.
Want to Show Performance and Not GIPS-Compliant?
/in Resources/by Kim CashThe SEC Marketing Rule will require SEC-registered firms to have policies and procedures in place be able to show performance in marketing materials after November 4, 2022. For firms not claiming compliance with the GIPS Standards this could be challenging.
Should SEC Regulations Re-Shape Your GIPS Reports?
/in Resources/by Kim CashAs firms update their annual GIPS Reports this year, unique questions in 2022 include whether to stick with the GIPS Standards requirements checklist or to incorporate new SEC Marketing Rule disclosures.
The SEC Marketing Rule specifically called out GIPS Reports as an example of a standardized presentation that, even if provided in a one-on-one meeting, would still meet the definition of an advertisement.
SEC Portability Predecessor Performance
/in Featured Resources, Resources/by Kim CashA portfolio manager’s track record is an important asset and key pillar of evaluation by institutional investors/asset owners. Ensuring that a portfolio manager’s performance can—or whether it should—go with her/him/the team to a new firm is of critical concern for planning or evaluating any transition.
GIPS Compliance: Insights for Asset Owners
/in Resources/by Kim CashInsights for GIPS Compliant Asset Owners – Getting comfortable with CFA Institute’s Net-of-Fee Terminology During 2021, pension plan headlines included fee transparency, the improper treatment of cash flows (and its […]
Verifier Independence
/in Resources/by Kim CashVerifier Independence drew dozens of attendee inquiries and comments at the 25th Annual GIPS Standards conference this year. The growth of virtual service offerings during the pandemic, more automation, and M&A activity in the compliance and verification provider space all require a fresh look at verifier independence.
Navigating Actual vs. Model Net-of-Fee Performance
/in Resources/by Janice KitzmanOne of the more common questions we get asked by firms is whether they should use model or actual fees to calculate net-of-fee composite returns. With the soon-to-be-implemented SEC Marketing Rule requirements for net-of-fee composite performance calculations, many firms will need to reconsider their current calculation methodology to make the best decision going forward.
FINRA Compliance: Calculating Private Equity IRRs
/in Resources/by Janice KitzmanNow that it is a regulatory requirement, we are working with private equity/venture capital firms to review their IRR calculations and marketing decks to ensure they meet the requirements established in the FINRA 20-21 notice.
Pooled Fund Net Returns & Expense Ratios
/in Resources/by Janice KitzmanLooking for a little distraction to kick-start the spring? We are highlighting five top performance Q&A’s focused on pooled fund expenses.
1. Someone said that the expense ratio should be annualized. What is the source for this requirement?
GIPS® Error Correction Basics
/in Resources/by Janice KitzmanEinstein said to make mistakes, because that’s how we learn and grow. And we all make them. That’s why the GIPS Standards include error correction requirements to provide transparency in reporting after a material error has been made. Below are our answers to error correction questions from attendees at this past year’s GIPS Conference.
Global Investment Performance Standards (GIPS®) For Marketers
/in Resources/by Janice KitzmanWith the finalization of 2020 performance, most marketing departments are completing their presentations. We have compiled pertinent questions from the GIPS Annual Conference to help compliant firms create marketing materials […]
GIPS® Report Distribution Requirements
/in Resources/by Janice KitzmanAs firms consider their GIPS Report Distribution policies we have compiled pertinent questions from the GIPS Annual Conference to help compliant firms distribute GIPS Reports and ensure disclosures are properly included.
Getting Year-End Assets Right
/in Resources/by Janice KitzmanIt’s time for calendar year updates to assets under management. Three questions from the attendees at the GIPS conference are worth a little extra attention when updating your GIPS reports […]
GIPS® Report Do’s and Don’ts
/in Resources/by Kim CashWondering what updates need to be made to you compliant presentations/GIPS Reports to meet the 2020 GIPS Standards? Check out this PDF which summarizes many of the updates.
GIPS® Verification Basics
/in Resources/by Janice KitzmanGIPS Verification Basics Attendees at this fall’s Annual GIPS Standards Conference submitted questions about verification and CFA Institute notification. We’ve answered 5 of those questions below. Why would a GIPS-compliant […]
GIPS® Reports – Managing Distribution Requirements
/in Resources/by Janice KitzmanGIPS Reports – Managing Distribution Requirements Does your firm manage segregated accounts and pooled funds? Are you writing 2020 policies to provide a composite report with the fee schedule and […]
2020 GIPS® Standards Q&As
/in Resources/by Kim CashThis is a comprehensive list of Q&A’s released as part of the GIPS standards Newsletter, organized by subject matter. As CFA Institute continues to add Q&As through the GIPS Standards Newsletter, we will continue to update this page.
GIPS® Advertising Guidelines
/in Resources/by Kim CashIt is hard to believe year-end reporting was completed just 3 months ago, and 2019 double-digit returns were something to be celebrated. It feels like the last 3 months have […]
MWRs vs. TWRs – Are 2020 GIPS Standard Changes a Better Fit for Your Firm?
/in Resources/by Kim CashWith the 2020 edition of the GIPS standards, firms claiming compliance with the GIPS standards now have a choice of whether to use time-weighted returns (TWRs) or money-weighted returns (MWRs). […]
Year-end Database Questions
/in Resources/by Kim CashIt’s that time of year for many firms to update annual performance statistics in compliant presentations and send them off to databases. For firms that want to jump right in […]
GIPS® Composite Reports – What’s Really Changing?
/in Resources/by Kim CashFor firms electing to update reports with 2019 performance, the season for making required changes is upon us. What is really changing to the GIPS compliant presentation besides now referring […]
2020 GIPS® Standards – Bridging the Fund vs. Composite Divide
/in Resources/by Kim CashKey Concepts for Fund Managers Firms managing only commingled funds often question the relevance of creating GIPS-compliant composites for pooled funds that are essentially already of asset-weighted, strategy specific “composites.” The 2020 GIPS […]
A 2020 GIPS Standards Game-Plan
/in Resources/by Kim CashFirst-Steps for Segregated Account Managers Firms managing segregated accounts who claim compliance with the GIPS standards – and firms who currently include pooled funds in composites, present TWRs, and expect to […]
GIPS® Standards Do’s & Don’ts
/in Resources/by Kim CashFirst Quarter 2019 is almost half over. Now is a great time for an in-depth review and refresh of firm-wide GIPS standards policies and procedures, especially for firms on an annual verification cycle. Here’s a list of Do’s and Don’ts to help with those P&P reviews and final polishing of GIPS Composite Reports.
Money-Weighted Returns in Excel
/in Featured Resources, Resources/by Kim CashBeyond “Don’t Use” – How (Not) to Calculate Money-Weighted Returns in Excel
If cost was of no matter, then asset managers would all own (fill in the blank with your favorite accounting system). For emerging asset management firms, cost does matter. When managing a start-up commingled fund, an investment firm only needs to calculate a single return stream to comply with best practices in the GIPS® standards. It’s hard to justify a six-figure expense when Microsoft Excel is free, never mind the pitfalls.
Multi-Asset Composite Membership Changes – GIPS® 2020
/in Resources/by Kim CashIn the 2020 GIPS Exposure Draft, provision 3.A.10 is a revision of 3.A.7 that incorporates the term “client-directed” from the GIPS handbook. It prohibits composite membership changes unless there is a composite redefinition or a documented “client-directed” change to a portfolio’s investment mandate, objective, or strategy.
This provision ensures an asset manager’s decisions are reflected in the composite’s performance, providing accountability for tactical decisions or style drift over time.
Advisory Only Assets – Understanding New GIPS® Terminology
/in Resources/by Kim CashThe roll-out of 2020 GIPS® is underway and currently open for comment. One of the more confusing provisions in the exposure draft is the proposed requirement to report Advisory Only Assets separate from GIPS Firm assets.
This 2020 GIPS provision is not a big departure from prior guidance. It is important, however, to understand if you and your colleagues—and regulators—use the term “advisory only” assets differently than it is used in the 2020 GIPS Glossary. This article will define the terminology and help you assess the impact of the new terminology for your firm, if any. We’ll also line up the GIPS terminology with regulatory assets under management and provide clarifying examples.
GIPS® Compliance, Marathons & Significant Events
/in Resources/by Kim CashI’ve been helping firms become GIPS compliant and have been running marathons for over 20 years, and last month, I just ran my fastest half marathon ever. The marathon was an inaugural Mt. Hood Revel run, and my husband was getting texts during the event tracking my bib number:
“One quarter done with a pace of 8:05 min/mile. Projected finish time of 3:33:26.41 at 9:05AM.”
Ten Steps to GIPS® Compliance
/in Resources/by Kim CashStep 1 – Gain Management Support: Management must commit time and resources to bring the firm into compliance. Create a GIPS committee that includes leaders from different departments at the firm.
Step 2 – Know the Standards: There is no way you’re going to get your whole firm to read the 400+ page GIPS Handbook or sit through a day-long work shop.
The primary objectives of the Global Investment Performance Standards (GIPS) are full disclosure and fair representation in marketing presentations. The benefits of GIPS compliance go beyond the compliant presentation, though. Claiming compliance with the GIPS standards shows a firm is committed to ethical best practices and that the firm employs strong internal control processes.