GIPS: Global Standard for Reporting Fund Manager Returns

The CFA (Chartered Financial Analyst) Institute created and published the Global Investment Performance Standards (GIPS) for investment management firmsin the September/October 1987 issue of the Financial Analysts Journal.  They would apply to investment advisers, certain brokers, mutual funds and consultants.  The objectives of GIPS reporting are to:

• Create a minimum standard method for calculating and presenting investment returns for global comparisons
• Ensure data are fair, accurate, consistent and timely
• Promote fair competition and eliminate barriers to entry
• Aid global self-regulation
• Acknowledge caveats for GIPS:  account selection, survivorship and measurement period biases

To achieve this, firms must follow these requirements:

• Consistent data integrity
• Uniform methods of calculation
• Complete and accurate composite construction
• Disclosure of any non-compliant history
• Reporting of long term performance is required

Additional information:

• Returns are calculated on a firm-wide basis.  They must be for at least five years and build up to ten years.  Obviously, if a firm is not five years old, then data from the inception needs to be reported.
• Performance must be presented with composite returns that have common objectives or strategies
• Managers should inform investors of any benchmark indices used for performance comparisons

Please note that compliance is purely voluntary.  GIPS promotes transparency, international comparability and best practices.  Full details may be found at http://www.gipsstandards.org/.

Another Type of Conference

I had the pleasure of attending a conference that was not sponsored by an investment bank. It was held by one of the CFA (Chartered Financial Analyst) Institute societies and was decidedly more low key. The accommodations were not at a posh hotel but at the society's offices. It was an open event; there were no gatekeepers. Anyone who would pay the fee could attend. There were also no breakout meetings scheduled. Everything was on a presentation basis, either by a single person or a moderated panel.

In general, there was an industry theme - how to find and select good fund managers. Experts from different financial firms such as Brown Brothers, Bank of America Merrill Lynch and Avenue Capital spoke for about an hour on various topics in Wealth Management, took questions from the audience and gave their views on the current state of the markets. It was an opportunity to sell their products as well.

Anyone interested in experiencing a conference without being in a buy side firm can go to one sponsored by their local CFA Institute society. You can go to www.nyssa.org to view a list of conferences to attend. Unfortunately, the food is not as good as an investment bank's industry conference.