1. The Firm Is Specified. In order to claim compliance with the GIPS standards, an investment management firm must define the precise entity that is claiming compliance. This definition may be the entire firm, or a subsidiary or division of a larger firm, so long as it is held out to clients and prospective clients as a distinct business entity.
In the context of the GIPS, a number of distinct business entities can be carved from the same corporation. To claim compliance, the distinct entity must:
a) be organizationally and functionally segregated from other business units and departments
b) retain discretion over the assets it manages, with autonomy in the decision-making process
c) have a distinct market or client type and/or use a certain investment process
2. Fair Representation and full disclosure are ensured.
3. All-Inclusive - Under the GIPS, firms are required to include all actual fee-paying, discretionary portfolios in at least one composite, defined according to a similar strategy and/or objective.
4. Minimum History - Firms are required to show a minimum five years of performance data, or show data since inception of the firm if the firm is younger.
5. Moving toward 10-Year Standard - Once five years of compliant data is achieved, a firm is required to add its annual performance for each of the next five years going forward, thus achieving a minimum 10-year track record.
6. Methodology/Disclosures - Specific requirements are made by the GIPS (depending on the type of manager and the assets being managed) with respect to calculation methodology, and the required disclosures it must make.
7. Integrity of Input Data - For example, composites and benchmarks must be ex ante (created before the fact), not ex post (created after the fact).
8. Required Provisions - Examples are those that must be adopted to client GIPS compliance and recommended provisions that ensure best practice. Over time, expect certain recommended elements to become required.
9. Additional/Supplemental Disclosures - These are often necessary, depending on the situation, in order to achieve the fair representation/full disclosure goals.
10. GIPS Updates, Guidance and Revised Requirements - These must be promptly adhered to, in order to claim compliance.
11. To Resolve Conflicts between local law and the GIPS, the presentation must adopt local law and must make disclosure of this fact.
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