GIPS® Standards Do’s & Don’ts

GIPS® Standards Do’s and Don’ts

First 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.

DO                                             DON’T

DO provide a compliant presentation to all prospective clients prior to or along with any other performance related inform
Add desktop procedures to effectively support this policy?
DON’T include inappropriate claims of GIPS verification/compliance.
Add as a compliance annual training point for your marketing team?
DO consider Consultant databases/RFPs as a prospective client and provide a compliant presentation. DON’T reference performance as GIPS compliant; the claim of compliance applies to the firm.
DO confirm all required disclosures are included in compliant presentations. DON’T use the term audited performance when referring to a firm-wide verification.
DO update the “verification through” date on the firm’s compliant presentations and policy & procedure document after each verification opinion is issued. DON’T present partial period performance for new/closed composites without also disclosing the period it represents.
DO disclose all material events/changes to the firm and composites. Consider/discuss with PMs any disclosure that might need to be added due to significant events? DON’T link performance periods that have a gap between them.
Are visual separations of different periods effective/not misleading?
DO link performance from a prior firm if it meets ALL portability requirements. DON’T link performance from a prior firm unless it meets ALL portability requirements.
DO clearly label model/representative account data as “supplemental” if it’s on the compliant presentation. DON’T link hypothetical and actual performance.
DO disclose the most appropriate fee schedule for prospective clients. Agree to ADV to capture any updates? DON’T use model fees that could result in composite net performance that is better than actual net of fee performance.
DO apply a consistent policy for the inclusion/exclusion of new/closed accounts in firm and composite year-end assets. Do GIPS standards firm AUM and ADV AUM reconcile? DON’T change the benchmark presented without including required disclosures.
DO keep a record of prospective clients who have received compliant presentations, to: Confirm provision at least annually, andAppropriately limit redistribution in the event of a material error. DON’T disregard local laws or regulations; they must be followed in addition to the GIPS standards requirements.

Questions/Comments? Contact Us: 503-887-5842

Money-Weighted Returns in Excel

Beyond “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.

Read more

GIPS® Compliance, Marathons & Significant Events

A GIPS Disclosure Analogy

I’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.”

Read more

Benefits of GIPS® Compliance

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.

Read more