Global Investment Performance Standards (GIPS): Definition and Uses

Overview

Global Investment Performance Standards (GIPS) are voluntary, industry-wide standards that define how investment managers calculate and present historical investment performance. Developed and maintained under the auspices of the CFA Institute and governed by the GIPS Executive Committee, GIPS aim to promote transparency, consistency, and comparability across firms and jurisdictions.

What GIPS Do

• Provide a uniform framework for calculating and presenting investment returns.
• Require firms to provide full disclosure and fair representation of performance, reducing the risk of misrepresentation.
• Standardize composite construction and reporting to eliminate survivorship bias and other historical omissions.
• Encourage robust internal controls, consistent input data, and standardized calculation methodologies.

Because GIPS are widely adopted globally, compliance helps firms present performance in a way that investors can directly compare across managers and markets.

Key Requirements (at a glance)

To claim GIPS compliance, a firm must demonstrate adherence to comprehensive rules covering:
– Input data quality and completeness
– Calculation methodology (e.g., return formulas, handling of cash flows)
– Composite construction (grouping portfolios by strategy or mandate)
– Required disclosures and performance presentation
– Ongoing reporting and recordkeeping

Benefits

For investors:
– Greater transparency and comparability when evaluating managers.
– Reduced risk of encountering biased or selectively presented track records.

For firms:
– Enhanced credibility, particularly when marketing to international or institutional clients.
– Streamlined cross-border reporting by using a single global standard.

History and Adoption

• Origins: The AIMR Performance Presentation Standards (AIMR–PPS) launched in 1987 for the U.S. and Canada.
• 1999: GIPS were introduced to create a global standard.
• 2005: A revised set established a unified global standard, replacing country-specific guidelines.
• 2020: The most recent edition of GIPS took effect on January 1, 2020.
• Current use: GIPS are implemented in dozens of markets worldwide; many of the largest global asset managers report compliance.

Key Takeaways

• GIPS are voluntary but widely respected standards for calculating and presenting investment performance.
• They promote fair representation, reduce survivorship bias, and make manager performance comparable across firms and countries.
• Compliance requires documented adherence to rules covering data, calculations, composites, disclosures, and reporting.

Further reading

Refer to the CFA Institute and the official GIPS standards documentation for full technical guidance and the complete set of rules and interpretation guidance.