Perfomance Verification

Is The GIPS Verification Cost Worth It?

Firms approach GIPS Verification from many different perspectives. Some are looking to enhance internal controls surrounding the investment performance process. Others are aiming to distribute their strategies via a platform that favors GIPS-verified firms. And yet others know that many institutions invest their assets exclusively with investment managers that have been GIPS verified.

While most investment managers agree that GIPS verification would enormously benefit their firms, many are lost when it comes to estimating the cost of GIPS verification.

Myths about GIPS verification providers’ fees abound. We have had virtual calls with many prospects who believe their firms would benefit from GIPS verification, but they claim they cannot afford the alleged “six-figure price tag” that comes with becoming GIPS verified. While large mutual fund complexes and sizeable institutional managers do pay high fees for this work, emerging managers will not likely pay over $30,000 per annum, and the vast majority will pay quite a lot less.
Here at Absolute, the components of a client’s GIPS verification costs are exclusively determined by the scope of the work. Our fees are irrelevant to a firm’s AUM size—we would never penalize a firm for being successful! The factors that go into determining fees are the total number of accounts, total number of strategies, the time periods being verified, and the client’s time frame to project completion.

Some firms opt for a non-GIPS performance attestation, and we are very pleased to provide this service as well. This alternative does not represent a fee savings, but in many cases, it may represent a savings internally with regard to a firm’s resources and willingness to invest in GIPS infrastructure. But the potential rewards tend to be inferior to those of GIPS.

GIPS verification costs are not as they are rumored to be, and the benefits of GIPS verification far outweigh the firm’s investment in GIPS.