Making the Decision to Become GIPS® Compliant – May 12, 2015 by Lindsay Selick

Global Investment Performance Standards (GIPS®) is a set of globally recognized standards used by investment management firms to calculate and present a complete and fair representation of performance results to investors. Complying with GIPS® is voluntary, and it requires a significant amount of preparation and ongoing oversight; however, firms can realize key advantages by becoming GIPS® compliant.

Why GIPS?

GIPS® compliance can provide a competitive edge. In addition to allowing current and prospective clients to compare performance among investment firms fairly and consistently, firms that comply with GIPS® add credibility to their performance reporting. Proactively choosing to adhere to these requirements illustrates a firm’s integrity and commitment to transparency. Additionally, as the investment industry is becoming increasingly global, GIPS® provides critical guidance and consistency for firms that compete throughout multiple markets.

Where to Begin

There are several phases to consider when contemplating GIPS® compliance. The most important phase will be to ramp up the firm’s knowledge about the standards. The Chartered Financial Analyst (CFA) Institute’s Global Investment Performance Standards website (www.gipsstandards.org) is a great resource to find the detailed requirements, standards and interpretations, as well as current developments affecting GIPS® compliance. Appointing a cross-functional team to study GIPS®, and later to focus on ongoing compliance, is a good first step. Typically, the team should consist of a variety of personnel from compliance, operations, marketing and portfolio management.

Once team members know what is required, they can begin to evaluate the firm’s ability to comply, including the key areas listed below:

  • Portfolio Software Capabilities – Does the firm use software that calculates performance in accordance with GIPS®?

  • Performance History – Has the firm complied with GIPS® for the past five years or since inception?

  • Document Retention – Is the required documentation available to support the calculation of the firm’s performance returns?

After the team has evaluated and considered the factors above, the firm can then create a plan and implement the necessary steps to become GIPS®compliant — steps such as more clearly defining the firm, developing additional policies and procedures, and defining and constructing the firm’s composites.

Crossing the Finish Line

It may have taken some effort, but becoming GIPS® compliant can serve as yet another feather in the cap of an investment management firm. However, once a firm is GIPS® compliant there is one more step needed to take full advantage of the hard work that went into getting there. A third-party, independent verification firm should be engaged to perform the required examination and issue its opinion that the firm has complied with GIPS®. This provides investors with the comfort that the firm’s performance measures up to the highest industry standards.

After compliance and/or verification is obtained, monitoring for compliance and for updates made to GIPS® requirements will help ensure the firm remains compliant and keeps its competitive advantage intact.


Cohen & Company is not rendering legal, accounting or other professional advice. Any action taken based on information in this blog should be taken only after a detailed review of the specific facts and circumstances.