Views on improving the integrity of global capital markets
19 October 2016

The Long-Awaited Pooled Fund Guidance Statement Nearing Release

The effort to create guidance on applying the GIPS® standards to pooled funds was initiated in response to an overwhelming indication from the industry of a need for clarification in this area. This guidance is critical in bringing the GIPS standards closer to achieving the goal of being as relevant as possible for all investment vehicles, which is part of the drive behind the GIPS 2020 update. It will also allow for greater comparability of pooled fund information across various jurisdictions, which will serve to increase investor confidence.

Ann Putallaz, CIPM, former chair of the GIPS Executive Committee and chair of the Pooled Funds Working Group, gave an update on the evolution of the guidance at the 20th Annual GIPS Standards Conference in September. The first meeting to kick off the project was held nearly four years ago in 2012. Since that time, numerous volunteers and CFA Institute staff have dedicated countless hours to developing this guidance. The single most important intended purpose of this guidance statement is to clarify a firm’s responsibilities with respect to the content and delivery of information to prospective pooled fund investors.

In January 2016, an exposure draft was released for public comment. During the 90-day comment period, 39 comments were received. Those that submitted comments were from 13 different markets and included fund companies, GIPS Sponsor organizations, industry groups, and individuals. Although many were supportive of the proposed guidance, others expressed that any guidance should be released only in the form of suggested best practices rather than requirements because a lot of markets are highly regulated when it comes to pooled funds. The comments also voiced a request for clarification on a variety of points, mainly on what funds, what firms, and what materials are within scope of this guidance.

A small group of industry experts have been addressing the feedback over the past several months. Based on these discussions, three criteria were developed to be used to determine what funds are within the scope of the guidance statement:

  1. There is typically no one-on-one contact during the marketing and sales process with the prospective pooled fund investor.
  2. The firm has the ability to influence the sales or marketing materials or the official documents that goes beyond legal responsibility.
  3. The fund is not trading on an exchange.

A revised draft of the guidance statement is expected to be presented to the GIPS Technical Committee for approval in the first quarter of 2017, and then it will go to the GIPS Executive Committee for review and approval. The release is expected to follow shortly after that. The effective date will be determined at that time that will allow a comfortable window for firms to implement this new guidance.

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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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