Proposed Changes to the GIPS Standards – GIPS 20/20

May 19, 2017

Here’s your chance to provide your input and ask questions related to the next version of the GIPS standards. The CFA Institute GIPS® Executive Committee (“GIPS EC”) is committed to ensuring that the GIPS standards are relevant to all asset managers and continue to be valuable to investors. Consistent with this mission, the GIPS EC is seeking your input on the next version of the GIPS standards through the release of the GIPS 20/20 Consultation Paper for public comment. The project is being referred to as “GIPS 20/20” to not only reflect the intention for the project to conclude by 2020 but also the goal of communicating a clear vision for the future of performance presentation standards.

During the April 2017 GIPS EC open meeting in London, it was explained that the timeline for GIPS 20/20 project is to:

  • Obtain industry feedback via the GIPS 20/20 Consultation Paper this year
  • Draft the next edition of the Standards and release an exposure draft for public comment in early 2018
  • Release the final version GIPS 20/20 in 2019 for compliant firms to adopt by 2020

To begin that first step, the GIPS 20/20 Consultation Paper was released this week outlining potential changes that are being considered. Some of the topics covered by the GIPS 20/20 Consultation Paper include:

  • Pooled fund performance vs. composite performance
  • Internal Rates of Return (IRR) vs Time-weighted Rates of Return (TWR)
  • Valuation frequency
  • Reporting total firm assets
  • Distribution of GIPS materials to existing clients
  • Timeliness and frequency for updating GIPS materials
  • The use of estimated trading expenses

The full paper is available on the GIPS website.

There is a 90-day comment period which ends July 16,2017. We are going to be taking a closer look at this over the upcoming weeks and encourage you to also submit your comments to Let us know if you would like to chat about the proposed changes.

GIPS Pooled Fund Guidance Adopted

April 3, 2017

The GIPS Executive Committee has adopted the long-awaited Guidance Statement on Broadly Distributed Pooled Funds. This guidance was developed primarily to address the fundamental question as to whether firms that claim compliance with the GIPS standards are required to distribute GIPS-compliant presentations to prospective pooled fund investors. It clearly illustrates that the answer to this question is “no” (at least for funds that would be considered “broadly distributed”) and also goes on to establish a minimum baseline with respect to information that should be provided to prospective pooled funds investors when a standard GIPS-compliant presentation is not applicable.

The adopted guidance includes some significant changes from the exposure draft that was issued for public comment, including:

  • The final guidance provides better clarity regarding the scope of funds that the guidance will be applicable to. In particular, the guidance clarifies that “broad distribution” does not necessarily mean that a product is only sold without direct contact with investors. A fund would still be considered broadly distributed (and, therefore, subject to the requirements of the guidance statement) if the fund manager occasionally interests directly with prospective investors, so long as the typical sales process does not involve direct contact.
  • Rather than mandating that required information be included in both official fund offering documents and fund-specific marketing materials, the final guidance only requires the information to be included in one or the other.
  • It also has reduced the number of required disclosures and statistics that must be included in materials by relegating benchmark returns to recommended information status. This was done to better align the guidance with the minimum regulatory precedent established throughout most of the developed world and to ease the perceived additional burden being placed on fund managers that operate in highly regulated markets where they are already subject to robust reporting requirements for their pooled funds
  • A “safe harbor” provision has also been added which outlines that CFA Institute is offering to review, upon request, the legal and/or regulatory regimes that firms may be subject to and determine whether they already have requirements related to pooled funds that mirror those of this guidance statement. Firms that operate under these regimes should then have confidence that, as long as they are meeting their legal and regulatory requirements, they are also satisfying the GIPS requirements under this guidance statement and no further action by the firm would be necessary. CFA Institute will make the list of approved regulatory regimes publicly available and, though no specific regimes have been identified as of yet, it will almost certainly include the SEC and FINRA.

The new guidance will be effective January 2018. A full version of the final guidance statement is available on the GIPS website at:

In addition, a summary of the key differences between the exposure draft and the final guidance statement is available at:

How many firms notified CFA Institute of GIPS Compliance?

February 8, 2017


Each year GIPS-compliant firms are required to notify the CFA Institute of their firm’s claim of GIPS compliance. Each year, the CFA Institute then reports on the number of firms who submitted information. For 2016, it was reported that initial data from the Firm Notification process shows that 1,608 firms submitted their claim of GIPS compliance in 2016 to CFA Institute. 1,383 (86%) of those firms are verified. Firms claiming GIPS compliance are located in 40 different countries. Roughly 90% of the 1,608 firms that submitted their notification form opted to be listed on the GIPS website which can accessed by clicking here.

GIPS EC Rings Nasdaq Closing Bell

January 26, 2017


In honor of the 30th anniversary of CFA Institute’s investment performance standards (GIPS® and their predecessor, AIMR-PPS®), CFA Institute staff and members of the GIPS Executive Committee (including one of Guardian’s principals, Arin Stancil, shown to the right of center, 2nd row, in the picture above) ring the Closing Bell at Nasdaq on January 26, 2017.


Photography by Christopher Galluzzo / Nasdaq, Inc.

Revised Guidance for Presenting Supplemental Information

December 12, 2016

Revised Guidance for Presenting Supplemental Information –  Public Comment Period Open

The revised Guidance Statement on the Use of Supplemental Information exposure draft has been released for public comment. This revised guidance provides new and more detailed interpretation on the treatment of performance and performance-related information both within and outside of a GIPS-compliant presentation. You can send your comments and feedback via email to; the public comment period is open until 28 February 2017.

CFA Institute GIPS Notification Form Updated

March 24, 2016

The revised GIPS Compliance Form for notifying CFA Institute when firms claim compliance with the GIPS standards is now available. This update reflects the continuation of the requirement initiated in 2015. The form needs to be submitted to CFA Institute by all firms that claim compliance with the GIPS standards by June 30, 2016.  Keep in mind that if your firm completed the form last year, that does not fulfill your obligation for 2016.  Submitting the form is now an ongoing annual requirement in order to maintain compliance with the GIPS standards.

Following is a summary of the changes that were made to the form.


  • In the “Primary Contact” section, a new question was added stating that CFA Institute “would like to support your firm’s ongoing success” and asking whether they can contact you.  It expects a simple “yes” or “no” response, but it is a required element of the form.
  • Under the “Firm Information” section, there is a new question asking for the submission of the organization’s GIPS firm definition.  A text box is provided so that the specific language used by the firm can be provided.  This question is optional.
  • In the “Firm Type and Structure” section, there are additional geography related questions.  The first question asks where your firm operates. The firm can check a box indicating that the firm is “global” or can specify selected countries and regions from an extensive list of over 200 options. The form then asks if CFA Institute can display the locations where the firm operates on the GIPS website.  This is a required “yes” or “no” question.
  • Under the “Firm Assets and Investment Vehicles” section, the question related to firm’s GIPS Total Firm Assets is worded in the same manner as last year, but the drop down list with asset ranges to select from has been modified to be less granular at the lower range of assets but more granular on the higher end.

The full form is available at

Lastly, the CFA Institute released summary statistics related to the findings from the information submitted last year. You can read about this at:

GIPS® Tackles Mutual Funds

January 29, 2016

The GIPS standards are based on the principle of consistency and comparability of investment performance results. To achieve this objective, the Standards create a framework that firms which choose to claim compliance must abide by. This framework includes prescribed methodologies that firms must use when calculating performance and a standardized list of disclosures that must be included in presentation materials. What the GIPS standards do not offer is guidance that can be universally applied to all scenarios.  Many complex issues have yet to be fully addressed within the scope of the GIPS standards and, at this point, remain open to interpretation until further guidance is provided.  One such issue relates to the application of the GIPS standards to broadly distributed pooled funds, such as mutual funds.  However, the wait for guidance in this area appears to be coming to a close.


Today the GIPS Technical Committee made available for public comment the  Exposure Draft of the Guidance Statement on Broadly Distributed Pooled Funds. As the name of the document implies, this proposed guidance is only applicable to “broadly distributed pooled funds,” which it outlines as encompassing “pooled unitized investment vehicles with broad distribution (i.e., where there is typically no or minimal contact between the firm managing the pooled fund and prospective pooled fund investors).” In the U.S. market, this primarily means mutual funds.


The proposed guidance statement makes it clear that firms are not required to provide or offer a GIPS-compliant presentation to mutual fund investors. However, guidance is being proposed that requires certain information that will need to be included in both the official pooled fund document (e.g., prospectus) and in fund-specific marketing material that the firm prepares. The required items include the following:

  • The description of the pooled fund’s investment mandate, objective, or strategy.
  • An indication of the pooled fund’s risk, either a qualitative narrative or a quantitative metric, as mandated by local regulators. If local regulators do not require a specific risk measure, the firm may choose the risk measure to present.
  • Pooled fund returns calculated according to the methodology and for the time periods required by local laws and regulations. If local regulators do not mandate a specific calculation methodology or frequency of returns, the guidance introduces options for what information must be presented.
  • Benchmark total returns for the same time periods as the pooled fund and a description of the benchmark.
  • The currency used to express performance.


In addition, two other items are recommended:

  • Disclosure of sales charges and loads and whether these fees have been deducted from performance.
  • The GIPS Pooled Fund Claim of Compliance, which would read as follows: “XYZ Firm, the firm managing this pooled fund, claims compliance with the Global Investment Performance Standards (GIPS®). For more information about the GIPS standards, please visit”


Note that this claim of compliance statement is different from both the claim of compliance required to be disclosed in a compliant presentation and the claim of compliance specified in the GIPS Advertising Guidelines.

If this guidance is adopted, meeting these requirements would completely satisfy the fund manager’s obligations related to providing information that adheres to the GIPS standards. Specifically, the fund manager would not be required to provide a GIPS-compliant presentation to prospective pooled fund investors. Additionally, an offer of a compliant presentation in an official pooled fund document or fund-specific marketing materials would neither be required nor explicitly recommended.

In our view, this is truly a new and different approach for the GIPS standards to take, because for the first time the focus is on something other than a composite as the vehicle for communicating investment performance results. We also believe this approach aligns with the idea that it is the firm that complies with the GIPS standards, not a particular investment strategy or marketing piece. The GIPS standards are about presenting performance results in a transparent, ethical, and consistent manner, and that applies regardless of what type of product you are selling.

We are eager to see how the industry embraces this proposed guidance.  We urge you to review the full document yourself and submit your comments to


To view the proposed guidance, visit the GIPS website.



New Appointments to GIPS® Committees

August 20, 2015

Earlier this month, CFA Institute announced the appointment of new members to the committees and country sponsor organizations responsible for oversight and development of the Global Investment Performance Standards (GIPS®). Congratulations to Arin Stancil, Principal at Guardian Performance Solutions, for being appointed to serve on the GIPS Executive Committee and Amy Jones, Principal at Guardian Performance Solutions, for her appointment to serve on the United States Investment Performance Committee (USIPC). The GIPS Executive Committee is the decision-making body for the GIPS standards and the USIPC is the official country sponsor for the GIPS standards in the United States, responsible for promoting the adoption and implementation of the GIPS standards throughout the United States. For more information click here.

Variations of Hypothetical Performance

July 31, 2015

Investment advisers will often use hypothetical performance results to market their investment track record.  One common reason this is done is when a firm is trying to launch a new strategy that they do not currently manage assets for.  Another reason could be that the manager feels that the hypothetical portfolio represents the purest version of their investment strategy (free from the noise caused by client restrictions and cash flow activity).

While the use of hypothetical information in marketing materials is not prohibited, it is generally highly scrutinized by regulators and requires clear and specific disclosure. Most advisers that use hypotheticals are perfectly fine with making these disclosures and labeling their results accordingly. The problem that we see is that many advisers don’t realize that what they are presenting is considered hypothetical information and, as result, they neglect to include the necessary disclosures.

The confusion is caused because many individuals have a somewhat limited view of what constitutes hypothetical performance.  The common interpretation is that hypothetical performance depicts results that do not represent actual trading of securities (i.e., a “paper portfolio” that does not hold any real assets). While this is an accurate definition, it doesn’t necessarily tell the whole story. A more comprehensive definition would be expanded to include results that do not represent actual trading of securities or involve assumptions that produce results that are not reflective of an actual investor’s experience. Performance information may be based on a foundation of actual results, but if assumptions are added to the calculations which cause the results to differ from what actual clients would have experienced, the information becomes hypothetical.

Some examples of the various types of hypotheticals are outlined below:

Model Portfolio Results

  • A model portfolio is generally thought of as a paper portfolio that does not hold any actual assets and is commonly understood to be hypothetical. It does not reflect actual trading of securities or the management of real assets, but investment decisions are typically made and documented in real time to best reflect how an actual portfolio would be managed.

Backtested Results

  • A backtest is a model portfolio that is constructed retroactively with the benefit of hindsight. It involves applying a model to historical financial data in order to produce results that reflect investment decisions that theoretically would have been made if the strategy had actually been employed during the historical time periods.

Actual + Model or Index Results

  • Often advisers will want to show how their strategy would have performed when combined with other strategies or asset classes. For example, a fixed income manager may want to show how combining their strategy with an equity portfolio would have impacted the overall performance of the combined portfolio.  To approximate this, the manager may aggregate their performance with a fixed percentage allocation to an equity index, like the S&P 500.  Even though the fixed income portion of the combined portfolio represents actual performance, combining the results with those of the S&P 500 creates a hypothetical return series since it does not reflect how actual assets were being managed.

Actual + Actual Results

  • This is probably the most confusing one to many people. Consider a manager with two distinct investment strategies, Strategy A and Strategy B.  The manager offers the strategies separately or in combined portfolios with varying asset allocation targets. When meeting with prospective clients interested in a blended portfolio, the manager may elect to blend the performance of accounts managed to the dedicated investment strategies using the prospect’s intended asset allocation target (e.g., 50% of Strategy A combined with 50% of Strategy B) rather than present the results of actual blended accounts. Even though the components of the blend represent actual performance of accounts managed to those strategies, the combining of the strategies into one return series using an assumed asset allocation creates a hypothetical return.

If you have questions about whether your performance is hypothetical or if you need help ensuring your disclosures are complete and accurate, please contact us at

Composite Management

May 29, 2015

Actually calculating composite performance is relatively straightforward once all the inputs are compiled. However, the tasks involved before the calculations can be performed can be daunting and time consuming depending on where data is stored and the technology available to construct composites.

Some firms utilize spreadsheets for calculating composite results while others rely on their portfolio accounting system which generally requires manual composite assignment. A trend we are seeing though is that more and more firms are utilizing composite management systems. A composite management system facilitates a systematic process to apply composite rules, construct composite membership, calculate returns and generate composite performance reports which can save time and improve the process. Firms that make the decision to use a system to maintain composites might do so because they have several years of performance history to construct or maybe the firm has a large number of accounts or complex composite rules that are difficult to maintain manually.


If you have questions about maintaining composite or the technology options available please contact us at