The Global Investment Performance Standards (GIPS) is a set of voluntary, ethical principles that govern the reporting, valuation, advertising and disclosure issues of the funds overseen by investment management firms. The GIPS benchmarks are primarily used when investment managers present the results of their financial performance to clients or prospective clients.
GIPS compliance provides prospective clients with information about a firm’s track record and can help investment firms maintain credibility with investors. The compliance process can also help firms identify where internal improvements to processes and workflows can be made. With the introduction of a global standard, investors are able to evaluate a fairly level playing field of GIPS-compliant firms.
The GIPS standards were established by the CFA Institute in 2005 in order to promote transparency and accuracy when conducting financial performance analyses. Since 2005, GIPS has become a widely accepted global standard, putting those who are not GIPS compliant at a disadvantage. The CFA Institute’s executive committee is responsible for developing and regulating the GIPS standards.
The GIPS guidelines require a verification process by which an independent verifier assesses whether a firm has complied with all the composite construction requirements of the GIPS principles on a firm-wide basis, and if the firm’s policies and procedures are designed to calculate and present performance in compliance with the GIPS specifications, according to the CFA Institute.
To hear the latest updates in GIPS standardization, attend the annual FTF Performance Measurement Conference.