What are the GIPS (Global Investment Performance Standards)?

Instructor: Michelle Reichartz

Michelle has lead multiple training initiatives and has a master's degree in Business Administration.

In this lesson, you will learn what Global Investment Performance Standards are, how they impact you as an investor, and what that means for expectations from your investment manager.

All About Expectations

Are you buying the right product? It's a common question, especially in today's market. No matter what product you are buying, it seems like there are so many options. Did you make the right choice, or was another product the better fit? Did you get all the features you wanted? Was the price right, or did you end up spending more than you wanted?

Now, consider all those questions when it comes to making decisions on your investments. It's frightening, isn't it? The investment industry is very complicated, and it can be difficult for a novice to navigate it fully aware of what they're getting into. So, how do you ensure you're making the right choice?

This is what Global Investment Performance Standards are for.

Intro to GIPS

Global Investment Performance Standards, also known as GIPS, are voluntary standards used by investment managers for presenting investment performance information in a fair manner. By providing a uniform presentation of this essential data, the investor is better equipped to make comparisons and appropriately decide which investment, or manager, is best for them. Although it is not meant to be a replacement for the appropriate amount of due diligence and research, it is meant to make that research process easier for your average investment client.

The GIPS standards were developed as early as 1980 and have been in use since 1999. These standards provide a cross-section of information meant to do the following:

  • Eliminate biases
  • Reduce misrepresentations
  • Get rid of historical data omissions

GIPS standards are administered by the Chartered Financial Analyst (CFA) Institute, who continuously provide a strategic view and to further the use of their standards. The GIPS Executive and Technical Committees of the CFA Institute are the primary bodies responsible for this review and careful oversight for their usage. More than 35 different country sponsors provide a link to these CFA committees for investment firms to work with.

Benefits of GIPS

GIPS benefits many parties involved in the investment process. However, the three primary groups who benefit from the GIPS standards are investment firms, investment clients, and compliance officers.

Investment firms that are certified as GIPS standards have a significant competitive advantage over those firms who do not have this certification. By holding themselves accountable to these higher standards, they are better able to provide assurances to their prospective client. These best practices allow them to be far more competitive as a firm.

Investment clients also very much benefit from the GIPS standards. Since GIPS standards must be certified, having this seal of approval provides additional confidence that they are making the right choice in an investment firm. In addition, the performance information presented to the client comes with the pledge to be uniform and easier to understand. It empowers the client to compare the performance information from every GIPS firm.

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