Saudi Arabia’s Sovereign Wealth Fund Claims GIPS Compliance
“PIF’s compliance with the GIPS standards is a testament to our continuous commitment to uphold world-class governance, transparency, and integrity in all of our activities. PIF’s adherence to the GIPS standards is not just a choice, but a statement of ethical leadership.” — Yasir A. Alsalman, Chief Financial Officer, Public Investment Fund (PIF)
Saudi Arabia’s Public Investment Fund (PIF), the world’s seventh largest sovereign wealth fund (SWF), with US $700 billion in assets under management (AUM), has claimed compliance with the CFA Institute Global Investment Performance Standards (GIPS®). By doing so, PIF underscores its ongoing commitment to global best practice and the highest levels of transparency and good governance. While not required, PIF was verified by an independent third party.
Introduced in 1999, the GIPS standards are global voluntary standards based on the fundamental principles of full disclosure and fair representation of investment performance. More than 1,700 firms and asset owners in 48 markets around the world have adopted the GIPS standards, which are administered by CFA Institute.
PIF joins some of the largest and most influential asset owners in the world that claim compliance with the GIPS standards. They include the California Public Employees’ Retirement System (CalPERS), with $452 billion in AUM, La Caisse de Dépôt e Placement du Québec (CDPQ), with $320 billion in AUM, and the California State Teachers Retirement System (CalSTRS), with $308 billion in AUM, the world’s fifth, 10th, and 11th largest public pensions, respectively. The Saudi Central Bank (SAMA), the ninth largest central bank in the world with $426 billion in AUM, is the first central bank in the world to claim GIPS compliance. The first insurer and asset owner to claim GIPS compliance, AIA, is the subject of “AIA’s Journey to GIPS Compliance, a Case Study in Future Proofing Investment Operations” and its GIPS compliance journey is documented in an instructive five-minute video.
While just over 20 asset owners claim compliance with the GIPS standards, they are a small but mighty group. Many are proud early adopters and will help other asset owners in their efforts to claim GIPS compliance. If your organization is an asset owner that is considering complying with the GIPS standards, reach out to us and we can connect you with GIPS-compliant asset owners who can share their insights with you.
Claiming compliance provides asset owners with many significant benefits:
- It demonstrates to legislative bodies, oversight bodies, and the general public a voluntary commitment to following ethical standards.
- Whether asset owners manage assets internally, externally, or both, GIPS compliance helps ensure their performance is completely and fairly presented.
- GIPS Asset Owner Reports foster strong investment decision making by aiding in the evaluation of investment performance, facilitating the understanding of progress toward investment objectives, and providing critical inputs into allocation decisions.
- Compliance requires establishment of robust investment performance policies and procedures that can minimize errors down the road, and it allows an asset owner to be confident that the data being presented to the oversight body is consistent and transparent.
- Compliance shows that assets owners are committed to adopting the same performance standards required of the external investment managers they hire.
- It demonstrates a commitment to follow global industry standards and best practice for valuation, performance calculation, and performance presentation.
Initially claiming compliance is not as challenging as some may think. An asset owner must first attain compliance, on an asset owner‒wide basis, for a minimum of one year, rather than five or 10 years as is required of firms. Prospectively, the asset owner must then build towards a 10-year-compliant track record. Asset owners must report their GIPS-compliant history to the oversight body in a GIPS Asset Owner Report. A GIPS Asset Owner Report is a presentation for a total fund or composite that contains all of the information required by the GIPS standards. It may also include other information.
CFA Institute has many helpful resources available on the GIPS standards website to assist asset owners interested in joining PIF and other leading asset owners as they set out on the path to GIPS compliance. Our latest tool — a sample asset owner policies and procedures manual — is one of my favorites.
Any questions about GIPS compliance? Contact Beth Kaiser Schwartz, CFA, CIPM, at [email protected] or the GIPS Standards Helpdesk at [email protected]. You can also register for the GIPS Standards Newsletter.
All posts are the opinion of the author. As such, they should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute.
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