What are Global Investment Performance Standards (GIPS)
The Global Investment Performance Standards (GIPS) are ethical standards used by investment managers. They are used when creating performance presentations that ensure fair representation and full disclosure of investment performance results. Global Investment Professional Standards were created by the CFA Institute and are governed by the GIPS Executive Committee. They are standardized guidelines for reporting the ability of an investment firm to make profits for investors.
Breaking Down Global Investment Performance Standards (GIPS)
GIPS are ethical standards that apply to the way investment performance is presented to potential and existing clients. Before GIPS was adopted, investment management firms complied with the Association for Investment Management and Research-Performance Presentation Standards (AIMR-PPS), which were published in 1993. GIPS are more global in their scope than the older AIMR standards.
In response to the need to update the standards the AIMR formed a GIPS committee in 1995. The first edition of GIPS was published in 1999. At this time, the AIMR also established the Investment Performance Council (IPC) to continue building out the standards. In 2005 the CFA Institute approved the new edition of GIPS and started the work of converging the old AIMR-PPS and GIPS to release them on date of Jan. 1, 2006, at which point the AIMR-PPS would cease to exist.
Global Investment Performance Standards: Who Are They For?
Investment management companies often specify that they are GIPS Compliant. It can lend additional credibility to investment management companies that do business outside of the more mature markets of North America and Europe. It is only a standard, however, and not a law; firms can choose not to comply with GIPS. The standard, because it is global in nature, makes it easier to for firms to do business in multiple countries, saving them time by having to apply different performance calculation measurements or investment presentations that include performance data depending on the locale. For more, see a CFA Institute Guidance Statement on GIPS compliance.
Global Investment Performance Standards: Current Standards
The standards are based on "the fundamental principles of full disclosure and fair representation of investment performance results," according to the CFA Institute. The GIPS standards consist of:
- Provisions of the GIPS standards, which includes information on compliance fundamentals, input data, calculation methodology, composite construction, disclosure, presentation and reporting, real estate, private equity, and wrap fee/separately managed account (SMA) portfolios.
- GIPS Valuation Principles
- GIPS Advertising Guidelines Verification
- GIPS Glossary Appendix (A-C) containing sample compliant presentations, advertisements, and list of composite descriptions
This most recent edition of the GIPS was approved in 2010 and became effective on January 1, 2011. In December 2017 the CFA Institute announced that it would launch the GIPS 20/20 project to update the GIPS, which entails collection and consideration of stakeholder input and opinions.