Q: Should I be GIPS Compliant?

A: GIPS Compliance makes most sense when there is a market demand for compliance.  GIPS Compliance can help open doors now or in the future.  In short if you currently are being asked if you are GIPS compliant or hope that in your marketing efforts will be asked in the future you should start the process.  When you are being asked if you are GIPS compliant it is already too late to become so for that opportunity.  It is also important to remember that claiming compliance with the GIPS standards is a firmwide initiative and can not be composite specific.

Q: How do I become GIPS Compliant?

A: GIPS Compliance is built on 3 major components.  1) Policies and Procedures that are in compliance with the standards; 2) Performance and statistics compiled in accordance with your firm’s Policies and Procedures; and 3) GIPS Reports which reflect the Performance and Statistics along with required disclosures.

Q: What are the steps to become GIPS Compliant?

A: Compliance starts with a good foundation.  The Policies and Procedures and the underlying books and records form the base layer of any GIPS compliance. Account level performance is calculated based upon required periods and is stored.  Accounts are grouped by Composite Definition and Composite Rules and compiled on an asset weighted basis for all accounts firmwide.  Composite information is grouped and compiled into GIPS Reports that can be distributed for marketing purposes.

Q: Do I need a GIPS Verification?

A: Similar to if GIPS Compliance is necessary receiving a GIPS Verification brings third party support to the claim of compliance.  If people are asking if you are compliant, you probably already needed to have completed the verification.  Many firms wait for a verification until they have sufficient assets, history, compliance regime, and accounts, or a combination of the three, before spending resources on a verification.  Many times, a firm will start with a verification in mind when the first step is becoming GIPS compliant.

Q: Do I need a Performance Examination on a composite?

A: a Performance Examination has actually been called many things over the years.  It is sometimes referred to as a Composite specific “Audit” and historically it was an AIMR-PPS Level II.  Regardless of what you call it, a Performance Examination only exists within a GIPS Verification.  Firms who elect to get a Performance Examination generally do so for marketing purposes.

Q: Is my track record portable?

A: The standards are specific in needing to have 4 items: Substantially all decision makers, decision making process intact, copy of books and records to support performance, and that there is no break in the track record.  Unfortunately, many of these items are not quite so clear cut.  If you can make a compelling argument for each of these items then you should feel safe in using a portable track record.