Perfomance Verification

The Ultimate Beneficiary of GIPS Compliance and Verification is the Investor

Why is GIPS gaining in popularity? A minimum global standard for firms to calculate and present their investment performance makes sense for everyone: the asset owner, the firm, and the investor. When an asset owner, such as a pension or endowment, can compare confidently the performance of several investment managers and make decisions with accuracy, the investor is who benefits.

The only way that can happen is when the firm is GIPS compliant, and to a greater extent, GIPS verified. In choosing to comply with GIPS, firms are voluntarily adhering to the highest ethical standard in the calculation and presentation of their investment results. In becoming GIPS verified, the firm affirms its commitment to investors, conveyed by the third-party assertion that the GIPS verifier provides.

A GIPS verification entails reviewing that the firm has designed its processes and procedures to calculate and present performance results in compliance with the GIPS standards, which revolves around a verification of the firm’s GIPS compliance manual. The GIPS verifier then asserts that the firm has complied with the GIPS standards’ composite construction requirements.

From the inception of the GIPS standards in 1999, the focus has always been on the investor. CFA Institute’s commitment to ethical and comparable investment performance standards in fact goes back to 1987, when the predecessors to the Global Investment Performance Standards (GIPS), then known as the Performance Presentation Standards, were first created.

In response to what had become an evident and urgent need for investment firms to present their performance in a manner that communicated fair representation and full disclosure, and with the counsel of industry leaders, the GIPS standards were created as practitioner-driven, non-regulatory, and voluntary. Most importantly, GIPS are a global standard.

Today, 2,000 firms, located in 41 countries around the world, claim compliance with GIPS.