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2013, Study Session # 1, Reading # 4

IMF = Investment
Management Firms
CVG = Country Version of
“GLOBAL INVESTMENT PERFORMANCE
GIPS
STANDARDS (GIPS®)”

4.a GIPS Objectives

Global acceptance of calculation & presentation standards (fair & full

disclosure).

Consistent & accurate investment performance data data in areas of reporting,
records, marketing & presentations.

To promote fair competition among IMFs & global self regulation.

Key Characteristics of GIPS

Define “firm” (reflect distinct business entity).

Ensure fair representation of results & full disclosure.

Include portfolios (fee-paying, discretionary) in composite for a minimum of five
years or since inception. Add annual performance each year to minimum of ten
years.

Use certain calculation & presentation standards & make disclosures.

GIPS contain both required & recommended provision.

Present all additional & supplemental information (encouraged).

Input data must be accurate & no partial compliance.

Follow local law in case of conflict with GIPS (disclose the conflict).

Certain recommendation may become requirements.

Private equity & real estate provisions are to be applied to these asset classes.

Fundamental of Compliance

Definition of the Firm

Requirements Recommendations

Total firm assets include total MV of Include broadest definition of the firm (all
discretionary & non-discretionary assets (fee geographical offices).
paying & non-fee paying).

If firm has discretion over sub-advisor
selection (include sub-advisor’s
performance).

Historical composite results will not change
(if firm changes its organization).

Document Polices & Procedures (requirements)

Document, in writing, polices & procedures the

firm uses to comply with GIPS.

Claim of Compliance (requirements)

Following accordance statement must used;

“[insert name of firm] has prepared and presented this report in
compliance with the Global investment performance standards
(GIPS®).”

No partial compliance & the statement “calculated in accordance with
GIPS” is not used for calculation methodologies & individual clients
(unless reporting portfolio results directly to that client).

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2013, Study Session # 1, Reading # 4

4.a Firm Fundamental Responsibilities (requirements)

Compliant presentation to all prospects.

List of composite descriptions to all prospects that make a request (list
discontinued composite for at least 5 years).

Separate noncompliant firms from GIPS compliant firm in case of joint
marketing.

Be aware of updates, guidance statements & the like.

4.b

Definition of firm ⇒ corporation, subsidiary or division held out to

client as a distinct business entity.

No non-compliant performance is presented for any periods after Jan
1st, 2000.

4.c

Firms may claim GIPS compliance for any CVG-compliant results prior
to Jan1, 2006.

Include CVG-compliant data to GIPS compliant until a minimum of ten
years of compliant performance is presented.

4.d Major Sections of GIPS

0. Fundamental of Compliance 1. Input Data 2. Calculation Methodology

Fundamental issues include:

Firm definition & documentation
of policies & procedures.

Complying with GIPS updates.

Appropriate compliance claim &
verification statement.
Should be consistent for full, fair
& comparable presentations.

Certain methodologies for portfolio
return calculation & certain other for
composite return calculations.

Uniformity is required for
comparability.

3. Composite Construction 4. Disclosure 5. Presentation & Reporting

Assets-weighted composite for fair
presentation.

Composite returns are asset-weighted
avg of returns on the portfolios
included in each composite.

Disclosure about performance &
policies.

There are some disclosures which all
firms must make while there are
others which are not applicable to all
circumstances for all firms.
Incorporate necessary return &
disclosure information according
to requirements of GIPS
standards.

6. Real Estate 7. Private Equity 8. Warp Fee/Separately Managed Account (SMA) Portfolios

Certain provisions in Sections 0-5 do
Must be valued according to GIPS Some provisions in section 0-5 are supplemented or replaced
not apply to all real estate investments Private Equity Valuation Principles. by the provisions specified in this section.
or are superseded by provisions in this
Open-end or evergreen fund follow
section. regular GIPS.

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