Financial Education

The Global Investment Performance Standards (GIPS)(R) were designed to promote a common worldwide standard for calculating and presenting investment performance. They ideally promote fair, global competition for all markets without creating barriers to entry for new investment managers.

GIPS are ethical standards intended to ensure fair representation and full disclosure of performance history. The standards apply to firms, not individuals within the firm. Although compliance is voluntary, all guidelines must be followed in order to claim compliance. The standards consist of both requirements (that must be followed) and recommendations (which should be followed as they constitute best practices.)

The GIPS standards apply worldwide. Firms located in any country are able to come into compliance with GIPS. When GIPS are in conflict with local laws, the local laws should be followed and the conflict should be disclosed when reporting performance.

All of a firm’s fee-paying, discretionary accounts must be included in a composite comprised of similar accounts, so that firms may not show only the best-performing accounts to prospective clients. Compliance must apply on a firm-wide basis: certain divisions cannot be claimed compliant when others are not. Firms must fully document their policies and procedures for maintaining compliance.

For more information, see all articles on: Investment Returns, Performance Measurement, Portfolio Management

See also:

Global Investment Performance Standards (GIPS)

Required Disclosures Under Global Investment Performance Standards (GIPS)

Presenting Composite Returns Under Global Investment Performance Standards (GIPS)

Calculating Portfolio Returns Under Global Investment Performance Standards (GIPS)

Composite Portfolio Construction Under Global Investment Performance Standards (GIPS)