Introduction to the Global Investments Performance Standards (GIPS)

Question 1

What are GIPS (Global Investments Performance Standards)?

Answer 1

GIPS are a set of ethical principles based on a standardised, industry-wide approach.

Investment firms can voluntarily follow GIPS. Standards seek to avoid misrepresentation of performances.

GIPS apply to investment managements firms, intended to serve current and future clients.

Question 2

Explain the contraction and purpose of a Composite.

Answer 2

Group of individual portfolios representing a similar investment strategy, objective or mandate.

Composite performances give clients information about the firms success.

Composites must include all fee-paying portfolios that the firm has managed (current and past). Composites should be chosen before evaluation has occurred to avoid bias/tampering.

Question 3

Explain the requirements of Verification.

Answer 3

Verification is performed on a firm-wide basis by a third party.

Must attest by all GIPS standards and use calculation methodology required by GIPS.

Verification applies to the entire firms performance measurement practices.