must be the corporation, subsidiary, or division that is held out to clients as a business

Definition of the firm entity

If a firm has different geographic locations, the definition of the firm should include all the
various geographic locations and their clients

refers to how a firm determines which of the portfolios it manages should be included in a
Definition of discretion composite

A firm may determine that a portfolio is nondiscretionary—​and therefore not include it in a

composite—​if the client places restrictions on it that prevent the manager from carrying out
the intended strategy

Firms must comply with all the requirements of the GIPS standards, including any updates,
Guidance Statements, interpretations, Questions & Answers, and clarifications published by
CFA Institute and the GIPS Executive Committee, which are available on the GIPS website as
Representative accounts well as in the GIPS Handbook

Survivorship Bias Misleading practices in the past Firms must comply with all applicable laws and regulations regarding the calculation and
presentation of performance

Varying time periods

Firms must not present performance or performance-​related information that is false or
misleading
Best practices for calculating and presenting

The GIPS standards must be applied on a firm-​wide basis

Worldwide acceptance
Fundamentals of compliance
Firms must document their policies and procedures used in establishing and maintaining
Accurate and consistent data GIPS Objectives
compliance with the GIPS standards, including ensuring the existence and ownership of
client assets, and must apply them consistently
Why created?
Fair, global competition
Requirements
If the firm does not meet all the requirements of the GIPS standards, it must not represent
Self-​regulation or state that it is “in compliance with the Global Investment Performance Standards except
for ...” or make any other statements that may indicate partial compliance with the GIPS
standards
Investment management firms
Who benefits from compliance?
Statements referring to the calculation methodology as being “in accordance,” “in
Prospective clients compliance,” or “consistent with” the GIPS standards, or similar statements, are prohibited

investment management firms that actually manage assets Statements referring to the performance of a single, existing client portfolio as being
“calculated in accordance with the GIPS standards” are prohibited, except when a GIPS-​
voluntary Who can claim compliance? compliant firm reports the performance of an individual client’s portfolio to that particular
client

fully comply with all requirements of GIPS or not comply all

Firms must make every reasonable effort to provide a compliant presentation to all
prospective clients. Firms must not choose whom they present a compliant presentation to.
As long as a prospective client has received a compliant presentation within the previous 12
months, the firm has met this requirement
Global Investment
Performance
Fundamentals of Compliance Firms must provide a complete list of composite descriptions to any prospective client that
Standards (GIPS)
makes such a request. They must include terminated composites on their list of composite
descriptions for at least five years after the composite termination date
Input Data and Calculation Methodology

Firms must provide a compliant presentation for any composite listed on their list of
Composite and Pooled Fund Maintenaince
composite descriptions to any prospective client that makes such a request

Composite Time-​weighted return report

Firms must be defined as an investment firm, subsidiary, or division held out to clients or
prospective clients as a distinct business entity
Composite Money-​weighted return report Key concepts of GIPS standards for firms

For periods beginning on or after January 1, 2011, total firm assets must be aggregate fair
Pooled Fund Time-​weighted return report value of all discretionary and non-​discretionary assets managed by the firm. This includes
both fee-​paying and non-​fee-​paying portfolios

Pooled Fund Money-​weighted return report'

Total firm assets must include assets assigned to a sub-​advisor, provided that the firm has
discretion over the selection of the sub-​advisor
GIPS Advertising guidelines

Changes in a firm’s organization must not lead to alteration of historical composite

performance

When the firm jointly markets with other firms, the firm claiming compliance with the GIPS
standards must ensure that it is clearly defined and separate from the other firms being
marketed, and that it is clear which firm is claiming compliance

A grouping of individual actual discretionary portfolios representing a similar investment Firms should comply with the recommendations of the GIPS standards, including
strategy, objective, or mandate recommendations in any updates, Guidance Statements, interpretations, Questions&
Answers, and clarifications published by CFA Institute and the GIPS Executive Committee,
which will be made available on the GIPS website as well as in the GIPS Handbook
A composite must include all fee-​paying, discretionary portfolios (current and past) that the
Recommendations
firm has managed in accordance with a particular strategy
Composite
Firms should be verified

The firm should identify which composite each managed portfolio is to be included in
before the portfolio’s performance is known in order to prevent composites with superior Firms should adopt the broadest, most meaningful definition of the firm, encompassing all
returns geographical offices operating under the same brand name regardless of the actual name
of the individual investment management company

Reporting on the performance of composites gives clients and prospects information about
the firm’s success in managing various types of securities and results for various investment Firms should provide to each existing client, on an annual basis, a compliant presentation
styles of the composite in which the client’s portfolio is included

All discretionary portfolios must be included in one, and only one, composite Who can claim verification Firms are encouraged to pursue independent verification of their compliance with GIPS

Verification must be performed by a third party in order to increase confidence in the firm’s
How to perform verification claim of compliance

Independent verification Verification applies to the entire firm’s performance measurement practices and methods,
not a selected composite

Verification increase the knowledge of the firm’s performance and improve the consistency
and quality of the firm’s compliant presentations

Advantages of performing verification

Verification provides assurance on whether the firm’s policies and procedures related to
composite and pooled fund maintenance, as well as the calculation, presentation, and
distribution of performance

Verification improves internal processes and procedures as well as marketing advantages to

the firm