The GIPS standards (Global Investment Performance Standards) represent a unified global framework that guides investment management firms in calculating and presenting investment performance fairly and accurately. These standards promote transparency and enable meaningful investment performance comparisons across international markets.

What Are GIPS Standards?

GIPS are globally accepted standards developed to standardize how investment management firms present their performance results to current and potential clients. Unlike the CFA Institute’s Code of Ethics and Standards of Professional Conduct—which applies to individual professionals—GIPS specifically targets investment management firms and asset owners. Only these entities—not individual advisors or consulting companies—are eligible to claim compliance with GIPS.

Why Were GIPS Created?

Over the past few decades, financial markets have significantly globalized. Investors and firms increasingly participate in cross-border investments involving diverse currencies and international markets. This global integration created a pressing need for a consistent method to measure and report investment performance—enabling investors to compare performance accurately globally. GIPS standards were formally introduced on February 19, 1999, to meet this need.

Historical Context

Since its inception in 1999, the GIPS standards have evolved through multiple updates to reflect changes in the investment industry and global financial markets. The most recent major update (the 2020 edition) was released in June 2019 and became effective on January 1, 2020. This edition introduced several structural and substantive changes, including tailored provisions for asset owners, pooled funds, and firms that only provide advisory services.

As of now, the 2020 edition is the version referenced in the CFA Program curriculum—including Level I—and is the current benchmark for firms claiming GIPS compliance. 

Key Features and Application of GIPS

Scope and Eligibility

GIPS applies to investment management firms and asset owners. Compliance with GIPS is voluntary; however, adherence demonstrates a firm’s commitment to presenting investment performance transparently, fairly, and consistently globally. Firms choosing compliance ensure their performance results are credible and easily comparable with potential and existing clients.

The 2020 edition introduced specific reporting requirements for Broad Distribution Pooled Funds (BDPFs) and Limited Distribution Pooled Funds (LDPFs), enhancing the standard’s applicability to various fund structures.

Benefits to Clients

Clients benefit substantially from the standardized approach to investment performance calculation and presentation the GIPS standards provide. GIPS compliance enhances investor confidence by providing clear, accurate, and reliable performance metrics—enabling investors to make informed comparisons across investment managers globally.

Advantages for Investment Management Firms

GIPS compliance offers several strategic advantages for investment management firms.

  • First, it allows firms operating in lightly regulated markets to compete fairly internationally by adhering to recognized global standards.
  • Second, adopting GIPS can help firms identify and rectify internal control and management system weaknesses, thereby improving their overall operational efficiency and governance.

The reintroduction of carve-outs with allocated cash under specific conditions in the 2020 edition has made compliance more practical for firms managing multi-asset portfolios.

While not mandatory, firms are strongly encouraged to undergo verification by an independent third party. Verification enhances the credibility of a firm’s claim of compliance and involves a comprehensive review of the firm’s GIPS policies and procedures and a sample of performance data.

GIPS Standards: Enhancing Global Trust and Transparency

Implementing GIPS standards significantly enhances trust and transparency within the investment management industry. By ensuring performance data integrity and comparability, GIPS supports investors in making informed decisions and facilitates equitable competition among investment management firms and asset owners worldwide. Adopting these standards underscores a firm’s commitment to ethical conduct and robust governance, ultimately contributing to a more reliable and efficient global investment environment.

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