Practical Guidance: The GIPS® Standards for Asset Owners
Practical Guidance: The GIPS® Standards for Asset Owners
September 2018
By Frances Barney
Our whitepaper reviews the key areas of focus for asset owners when seeking to become GIPS compliant, identifies requirements that are different for asset owners as compared to investment managers, provides a guide for an asset owner to become GIPS compliant, and answers to commonly asked questions.
The popularity and worldwide adoption of the Global Investment Performance Standards (GIPS®)* by investment management firms is largely due to demand by asset owners. In order to trust investment performance when hiring an outsourced manager, asset owners increasingly require investment managers to comply with the GIPS standards. Through these interactions, asset owners have come to understand the importance of one global, ethical set of standards for performance measurement calculation and presentation and want to apply the same principles to their own performance reporting. As a result of the increased transparency and due diligence on the part of asset owners, we are seeing a growing interest in attaining GIPS compliance amongst the asset owner community. In the past, GIPS compliance for asset owners was difficult because there was no interpretive guidance for how the GIPS standards should be applied to their structure. To address this, on September 16, 2014, the GIPS Executive Committee approved the Guidance Statement on the Application of the GIPS Standards to Asset Owners (“Guidance Statement”). The GIPS Executive Committee took further action on August 16, 2017, and released an updated version of the Guidance Statement. With an effective date of January 1, 2018, the Guidance Statement permits asset owners to claim GIPS compliance with only one (1) year of compliant data instead of five (5) years, while still building towards ten (10) years of compliant data.¹
If the Proposed Guidance Statement is adopted, and asset owners are permitted to bring just one year into compliance, we expect to see a greater uptake in the number of asset owners claiming GIPS compliance. Additionally, asset owners increasingly are claiming GIPS compliance for the following reasons:
- The desire to hold themselves to the same standards as their external managers;
- The need to provide full and transparent performance information and related disclosures in line with industry best practices to the public and oversight board; and
- An improved compliance framework inclusive of standardized policies and procedures related to performance.
This paper includes:
- GIPS Standards for Asset Owners
- Practical Guide for Asset Owners to Claim Compliance
- Common Questions and Answers
“The GIPS standards are continuing to evolve to ensure practical, investment industry relevance to asset owners and other firms while maintaining their core purpose: delivering performance transparency and comparability for the benefit of investors globally. ”
— PAUL SMITH, CFA, CFA INSTITUTE PRESIDENT AND CEO
* GIPS is a registered trademark of CFA Institute.
¹The proposed revision to the Guidance Statement on the Application of the GIPS Standards to Asset Owners is subject to change based on public comments and subsequent review.
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