Views on improving the integrity of global capital markets
18 November 2013

Coming Soon: Guidance Statement for Applying the GIPS Standards to Asset Owners


A three-year-long effort was presented to the public earlier this year as the Exposure Draft of the Guidance Statement on the Application of the GIPS Standards to Pension Funds, Endowments, Foundations, and Other Similar Entities was released for comment. An extended comment period ended in August 2013, and a project team is reviewing and incorporating the feedback to further enhance the resource. The comments received indicate that the industry has a generally positive view of the guidance. Comments shed light on areas where more clarification is needed and provide valuable insights into some of the concerns in applying the guidance to certain situations.

This industry participation has substantiated the support and need for guidance on applying the GIPS standards to pension funds. Furthermore, the comments have provided constructive feedback that will enable us to build on existing content and facilitate a more thorough understanding of the Guidance Statement. The responses are vital to the process, and every comment will be taken into consideration.

The GIPS standards revolve, in large part, around presenting performance to prospective clients and were written with firms in mind that have prospective clients. The upcoming guidance statement was developed because asset owners do not have prospective clients. Over the years, this segment of the investment industry has grown in size and complexity. This soon-to-be released Guidance Statement focuses on how to apply the GIPS standards to asset owners and primarily addresses the inherent differences in application.

Why Should Asset Owners Comply?

All firms or organizations that manage actual assets may claim compliance with the GIPS standards. This includes plan sponsors, foundations, endowments, and similar entities that manage discretionary assets either internally and/or via third-party sub-advisers. The GIPS standards provide investors with assurance that their performance metrics are based on the principles of fair representation and full disclosure. This is especially important given considerable public scrutiny on some of these funds, decreasing benefits, increasing contributions, and growing legislature and pension reform.

In addition, the decision to comply with the GIPS standards is a step toward practicing good governance. The GIPS standards offer stronger internal controls, result in robust policies and procedures, and promote transparency.

One way that the impact of the GIPS standards on the investment industry can be measured is an increase in assets under management by firms that claim compliance. This guidance is a milestone for the success of the GIPS standards that we are excited to release in the near future.

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About the Author(s)
Anju Grover, CIPM

Anju Grover, CIPM, is a senior GIPS analyst in the Investment Performance Standards Policy Group of CFA Institute. She develops new project ideas for the GIPS standards and acts as a staff liaison for numerous global volunteer committees that oversee the development and promulgation of the GIPS standards.

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