GIPS Compliance Actions for the New Year 2020

January 9, 2022
15 min
GIPS Compliance Actions for the New Year 2020

Your firm works hard to comply with the Global Investment Performance Standards (GIPS®) and likely expects the benefits of GIPS to far outweigh any burden associated with maintaining compliance. Most of the policies and procedures your firm set when first becoming compliant will never need to change; however, as both the standards and your firm evolves, it is beneficial to conduct a high-level review of your GIPS compliance each year. This high-level review will help ensure that you continually refine your processes and policies to maximize the benefits of claiming compliance with GIPS year after year.

This year, conducting a review of your firm’s GIPS compliance is especially important because of the 2020 Edition of the GIPS Standards that was published in mid-2019. For information specific to the 2020 changes, please check out 2020 GIPS Standards: Prepare for the Changes.

Even without the release of a new edition of the standards, each year you should conduct a review. In the review, you should first make sure you have the right people involved. One person or department may be responsible for managing the day-to-day tasks that maintain your GIPS compliance; however, high-level oversight from a larger group should take place to help ensure that any decisions made or policies set will integrate well with your firm’s other strategic initiatives. This larger group, often called a GIPS Committee, typically consists of representatives from compliance, marketing, portfolio management, operations/performance, and senior management.

Not everyone on the committee needs to be an expert in the GIPS standards. In fact, many will not be. What they will need is to be available to share their opinions and represent their department’s interests when establishing or changing key policies for your firm. Your GIPS compliance expert/manager can set the agenda for your meeting and can provide any background on the requirements that will be part of the discussion. If you do not have a GIPS expert internally, or need independent advice about your policies and procedures, a GIPS consultant can be hired to help.

High-Level GIPS Topics to Consider Annually

Once you select the right group to represent each major area of your firm, the following high-level questions can help determine if any action is necessary to improve your GIPS compliance this year:

  • Have there been any changes to the GIPS standards?
  • Have there been any material changes to your firm or strategies?
  • Do your composites meaningfully represent your strategies or should their structure and descriptions be reconsidered?
  • Are the materiality thresholds stated in your error correction policy appropriate for the type of strategies you manage and are they consistent with the thresholds set by similar firms?
  • Are you satisfied with the service received from your GIPS verifier for the fee that is paid?
  • Is there any due diligence you need to conduct on your verification firm?

Changes to the GIPS Standards

It is important to consider whether there have been any changes to the GIPS standards since last year that would require your firm to take action. For example, if a new requirement is adopted, you should consider if any changes to your firm’s policies and procedures or GIPS Reports are needed.

Keep in mind that GIPS compliant firms must comply with all requirements of the GIPS standards including any updates that may be published in the form of Guidance Statements, Questions & Answers (Q&As), or other written interpretations.

If your firm is verified or works with a GIPS consultant, these GIPS experts are likely keeping you informed of any changes to the standards. The best way to check for changes yourself is to visit the “Standards & Guidance” section of www.gipsstandards.org. Specifically, you should check the “GIPS Q&A Database” where you can enter the effective date range of the previous year to see every Q&A published during this period. You should also check the “Guidance Statements” section. The guidance statements are organized by year published, so it is easy to see when new statements are added.

With the new 2020 Edition of the GIPS Standards, a review of the changes to determine how they affect your firm is especially important this year. These changes must be fully adopted before presenting returns in your GIPS reports for periods ending on 31 December 2020 or later.

Changes to Your Firm or Strategies

Similar to changes in the standards, it is important to also consider whether any changes to your firm or its strategies would require you to take action. Examples include, material changes in the way a strategy is managed, a new strategy that was launched, an existing strategy that closed, mergers or acquisitions, or anything else that would be considered a material event for your firm.

Even if no changes were made this year, you should still read your entire policies and procedures document at least annually to make sure it adequately and accurately describes the actual practices followed by your firm. Regulators, such as the Securities and Exchange Commission (SEC), commonly review firms’ policies and procedures to ensure 1) that the document includes actual procedures and is not simply a list of policies and 2) that the stated procedures truly represent the procedures followed by the firm. Many firms have created their policies and procedures document based on template language, so tweaks may be necessary to customize the document for your firm.

Meaningful Composite Structure

The section of your GIPS policies and procedures requiring the most frequent adjustment is your firm’s list of composite descriptions, as you must make changes each time a new composite is added or if a composite closes. However, even without adding new strategies or closing older strategies, the list of composite descriptions should be reviewed at least annually to ensure they are defined in a manner that best represents the strategies as you manage them today.

Since your firm’s prospects will compare your composite results to those of similar firms, it is important that your composites provide a meaningful representation of your strategies and are easily comparable to similar composites managed by your competitors. If a review of your current list of composite descriptions leads you to realize that your strategies are defined too broadly, too narrowly, or in a way that no longer accurately describes the strategy, changes can be made (with disclosure).

Keep in mind that changes should not be made frequently and cannot be made for the purpose of making your performance appear better. Changing your composite structure for the purpose of improving your performance results, as opposed to improving the composite’s representation of your strategy, would be considered “cherry picking.”

Two examples of cases that may require a change in your composites include:

  1. A strategy has evolved and certain aspects of the way the strategy was managed and defined in the past are different from today. This can be addressed by redefining the composite. Redefining the composite requires you to disclose the date and description of the change. This disclosure will help prospects understand how the strategy was managed for each time period presented and when the shift in strategy took place. Changes like this should be made to your composite descriptions at the time of the change, but an annual review can help you address any items that may have been overlooked when the change occurred.
  2. A composite is defined broadly to include all large capitalization accounts. Within this large capitalization composite, there are accounts with a growth focus and others with a value focus. If your closest competitors are separately presenting large capitalization growth and large capitalization value composites, your broadly defined large capitalization composite may be difficult for prospects to meaningfully compare to your competitors. To address this, you can create new, more narrowly defined composites to separate the accounts with the growth and value mandates. In this case, the full history will be separated and the composite creation date disclosed for these new composites will be the date you make the change. Note that this will demonstrate to prospective clients that you had the benefit of hindsight when determining the definition.

Materiality Thresholds Stated in Your Error Correction Policy

Another section of your firm’s GIPS policies and procedures that should be reviewed in detail is your error correction policy. Your error correction policy includes thresholds that pre-determine which errors (of those that may occur in your GIPS Reports) are considered material versus those deemed immaterial. These thresholds cannot be changed upon finding an error; however, they can be updated prospectively if you feel a change would improve your policy.

Many firms had a difficult time setting these thresholds when this requirement first went into effect back at the start of 2011. Now that much more information is available to help you determine these thresholds, such as the GIPS Error Correction Survey, you may want to revisit your policy to ensure it is adequate.

Setting and approving materiality thresholds that determine material versus immaterial errors is a task best suited for your firm’s GIPS committee rather than your GIPS department or manager. The reason for this is that opinions of what constitutes a material error will vary from one department to another. Your committee can help find a balance between those with a more conservative approach and those with a more aggressive approach to ensure the thresholds selected are appropriate.

GIPS Verifier Selection and Due Diligence

If your firm is verified, it is important to periodically evaluate whether you are satisfied with the quality of the service received for the fees paid. You may also want to consider whether you need to conduct any periodic due diligence on your verification firm with respect to data security or other concerns important to your firm.

With several mergers, acquisitions, and start-ups in the verification community over the last few years, you may need to do some research to ensure you are familiar with what your options are when selecting a verification firm.

All verifiers have the same general objective: to test and opine on 1) whether your firm has complied with all of the composite construction requirements of the GIPS standards and 2) whether your firm’s GIPS processes and procedures are designed to calculate and present performance in compliance with GIPS. Where they differ is in the fees charged and process followed to complete the verification.

With regard to fees, much of the difference between verifiers is based on their level of brand recognition rather than differences in the quality of their service. For example, smaller firms specialized in GIPS verification may have more experience with the intricacies of GIPS compliance than a global accounting firm; yet, a global accounting firm will likely charge a higher fee. When selecting a higher fee firm, it is important to consider whether the higher fee is offset by the benefit your firm receives when listing their brand name as your verifier in RFPs you complete.

With regard to process, the primary difference between verification firms is whether the verification testing is done onsite or remotely. There are pros and cons to both methods and it is important for your firm to consider which works best for the team that is fielding the verification document requests. The onsite approach may result in finishing the verification in a shorter period, but may be disruptive to your other responsibilities while the verification team is in your office. The remote approach may be less disruptive to your other responsibilities, but likely will take longer to complete and may be less efficient as documents are exchanged back and forth over an extended period of time. Another difference is how the engagement team is structured, whether you can expect to work with the same team each year, and how much experience your main contact has.

Regardless of whether the verification is conducted onsite or remotely, be sure to ask any verifier how your proprietary information and confidential client data is protected. If the work is done remotely, how are sensitive documents transferred between your firm and the verifier (e.g., is it through email or a secure portal) and once received by the verifier, do they have strong controls in place to ensure your data is not breached.

If the work is done onsite, it is important to ask what documents (or copies of documents), if any, the verifier will be taking with them when they leave, and whether these documents are saved in a secure manner. Documents saved locally on a laptop are at higher risk of being compromised.

Questions?

For more information on how to maximize the benefits your firm receives from being GIPS compliant or for other investment performance and GIPS compliance information, contact Sean Gilligan at sean@longspeakadvisory.com.

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If AI does much of the performance work that taught us,what will teach the next generation of performance experts?

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I recently sat in on a webinar with Hope Morrissey of BigPi on building AI tools inside a firm. It was practical and timely: at Longs Peak, we are building out our own workbench, and much of the conversation mapped onto choices we are making right now.

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But the question I asked at the end wasn't about tooling. It was about people.

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Most of us learned this profession by doing grunt work. We linked monthly returns by hand in Excel. We built and rebuilt composites line by line. We chased a 3 bp difference for an afternoon and found a fee posted to the wrong month. We made mistakes, and someone more experienced caught them and explained why.

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That work is going away, and maybe it should. AI and automation increasingly handle reconciliation, first-pass review and draft disclosures faster than any analyst. What's left, and what matters most, is judgment and expertise.

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Which raises the uncomfortable part: if the work that built today's experts disappears, how do we build tomorrow's?

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The grunt work was never really about the math

Looking back, the spreadsheets weren't the lesson. They were the delivery mechanism for three things that nobody taught us directly.

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  • A feel for what normal looks like. After linking monthly returns for a few months or running VLOOKUPs to map the right data to the right composite, you get to know what a normal month looks like and, perhaps more importantly, when one looks off.
  • A map of where things break. Every error made by hand taught us where errors live: the cash flow cutoff, the fee accrual, the stale price, or the account that should have left the composite two months ago.
  • Ownership of the number. When you built it yourself, you could defend it. You knew every assumption inside it.

That is the raw material of judgment. AI doesn't remove the need for it. It removes the accidental way we used to acquire it. So, the answer isn't to preserve busywork for its own sake. It's to identify what the grunt work was teaching and teach it on purpose.

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Judgment is the new edge

Shortly after the webinar, I came across a LinkedIn post built on comments NVIDIA CEO Jensen Huang made on the podcast A Bit Personal. Huang pushed back on the usual definition of smart: "somebody who's intelligent, solves [technical] problems." His view: "I find that's a commodity." The people he values are technically astute but can also "infer the unspoken" and "see around corners."

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That lands hard in performance measurement. For two decades our credibility rested on getting the math right: time-weighted returns, composite construction, dispersion, three-year standard deviation. Systems already do most of that. AI is now taking the rest.

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What remains is the judgment call, the “unknowables.” Is this account still discretionary? Does this cash flow policy make sense for how the strategy is actually marketed? Is this benchmark still the right comparison after the strategy drifted (or the benchmark got too concentrated)?

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Those questions don't have a formula and often require interpretation rather than automation. They have experience behind them. And that brings us back to the training problem.

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Rebuilding the apprenticeship on purpose

Historically, nobody had to think very hard about how someone learned the job. You hired smart people, gave them the work, and the work did the teaching. Judgment showed up eventually, usually starting somewhere around the end of the first year.

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That approach falls apart once the work itself is automated. If we want people who can make good calls, we have to create the experiences that used to happen by accident. I don’t think we have this fully figured out, but these are the five things I keep coming back to.

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1. Do it by hand once, then let the machine do it

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I still think every new analyst should calculate both time-weighted and money-weighted returns by hand, link a quarter of monthly returns, and put together a small composite from scratch, at least once. Nobody is going to do it that way in production. The point is that it's very hard to supervise a process you've never done yourself. If you don't know where a cashflow belongs in the formula, you won't notice when something is in the wrong place.

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Once they've done it, have them run the same data through your automation tools and compare. Sometimes the results match. If they don't, working out why (a different day-weighting convention, a fee treated differently, a cash flow on the wrong date) teaches more about how th calculation really works than any training deck I've seen.

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2. Make the reviewer the new entry-level job

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For most performance teams, the junior job was to produce the number and someone more senior checked it. Now the machine increasingly produces the number, so the junior job becomes checking it. That's a harder place to start, because we're asking people to review work they may not have spent years doing themselves.

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One way to close that gap is to build exercises out of past results. Take AI-generated output and plant real errors (built from anonymized or synthetic examples) seen over the years: a mispriced security, a trade booked a day late, a fee posted to the wrong month, an account that should have left the composite and didn't. Ask newer team members to find them before a senior reviewer does. They may not catch everything at first, and that's fine. Talking through what they missed is where the pattern recognition starts to form, much the way it formed when those mistakes were made by doing the work by hand.

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3. Write down the instinct before you investigate

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Experienced performance professionals can usually tell something is off before they can explain why. Dispersion that jumps dramatically in a calm quarter. An account that is consistently a composite outlier. A composite return that beats every account in it, by a lot. That instinct is valuable, but it isn't always right. Sometimes it's just bias, and the number is actually fine.

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A simple habit helps. When something looks wrong, have the analyst write down what they think is going on before they start digging. Once they've found the answer, have them go back and note whether their first read held up. After a few months they should have a real record of where their instincts are reliable and where they aren't. When those notes are tracked and talked through as part of training, senior team members can see how someone reasons, not just whether they got the right answer.

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4. Teach people to hear what isn't in the file

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Much of our value sits in the gap between the data and what's happening at the firm. An account quietly drops out of a composite and nobody mentions why. Marketing starts promoting a new strategy before anyone has asked whether it needs its own composite. A portfolio manager mentions "a bit of a style tilt" in passing on a call. None of that is in the file, and AI can only work from the context we provide. If no one recognize what matters and brings it to the table, the tool will never know it was there.

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That kind of listening is not new, but it is hard to teach in a classroom. The best way I know is to bring junior team members into the rooms where it happens, early, even if they don't say a word. On an in-house performance team, that might be the monthly attribution review with the portfolio managers, the product committee when a new strategy is on the table, or the kickoff call with your verifier. On our side as consultants, it's client calls and verification kickoffs. In-house teams actually have an advantage here because they sit down the hall from PMs, operations and compliance, and an informal conversation is often where changes show up. Encourage juniors to participate in those conversations instead of working only from the data feed.

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Either way, debrief afterward. Ask what they heard that wasn't in the data, and what they would follow up on. The first few answers maybe thin, so share what you heard. Over time they'll pick up on things they used to overlook. That's probably one of the clearest signs that someone is developing real judgment.

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5. Turn your own history into the curriculum

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Our best training material is our own history of judgment calls. Build a library of real cases (anonymized of course): the facts, what was decided, why, and what you'd do differently now. Include the ones you got wrong.

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Run "what could go wrong" exercises together to pass judgment along. Before a verification, exam, or new factsheet goes out, get the team together and ask: "It's six months from now and this went badly. What happened?" Have everyone write their answers down before anyone shares. Newer staff hear what experienced people worry about and why: an undocumented policy change, hypothetical performance shown without the required policies, a net-of-fee calculation that doesn't tie to the fee schedule. That's knowledge that usually takes years to pick up by accident.

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What this asks of leaders

This isn't only a training problem. It's a leadership choice about where the time AI saves actually goes.

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  • Reinvest the hours. If automation saves a senior reviewer ten hours a month, some of those hours belong to teaching. Otherwise, efficiency quietly eats the pipeline of future experts.
  • Hire for judgment. Give candidates a messy composite file and ask what worries them, rather than screening on credentials alone.
  • Build tools that explain, not just answer. As we build our workbench at Longs Peak, one question I keep asking is whether our tools show its reasoning. A tool that explains why it flagged an account teaches. A tool that just flags it doesn't.
  • Measure what matters. Performance teams measure investment results for a living, yet rarely measure their own judgment. Whether you sit inside an investment firm or advise one, track the issues your team caught before the verifier, auditor, compliance or a regulator did, and who caught them. Over time, that tells you more about how your people are developing than how quickly the reports go out.

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The experts of the future won't learn the way we did

That's not a loss if we're deliberate about it. The firms that get this right will use AI to move people faster from producing numbers to questioning them, and they'll treat that shift as a training design problem, not a happy accident.

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I don't think anyone has fully solved this yet. We’re trying to be intentional about our future pipeline. I'd like to hear how other performance teams are approaching it. What are you doing to build judgment in people who may never link a return by hand?

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And as always, reach out if you want help rethinking how your team builds judgment in performance measurement at hello@longspeakadvisory.com.

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Sources

  • Jensen Huang quotes as reported by Upworthy (Feb 3, 2026), from his appearance on A Bit Personal with Jodi Shelton.

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Every so often we hear it: "Oh, you're one of the performance software tools."

It's an understandable assumption. We work in the same world as the software providers: composites, Global Investment Performance Standards (GIPS®), performance data, and the systems that produce all of it. From the outside, it can look like we're all selling the same thing.

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We aren't. And if you're deciding how to support your performance and GIPS compliance work, the difference is worth understanding.

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The short version: Longs Peak is a team of people who do the work with you, or for you. We're not a platform you log into. Behind the scenes, our tools help our team deliver faster, more consistent service. But no number leaves our hands without a real performance expert standing behind it.

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Software Gives You a Capability. Someone Still Has to Run It.

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A software provider hands you a tool. A good one can be powerful, and those systems offer a ton of capabilities. But once the tool is installed, the work to run it lands on your desk.

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Someone on your team still has to load the data, set up and maintain the composites, review the results, chase down the account that looks off, and know the GIPS standards well enough to make the judgment calls. Software can calculate a return. It can't decide whether a new account belongs in a composite, explain why a number moved, or figure out what to do when a custodian changes its data feed.

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What We Actually Do

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At Longs Peak, we get our hands dirty, so you don't have to. In practice, that means:

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  • We manage your composites. Membership decisions, inclusion and exclusion, periodic updates, and the returns that come out the other end. We work alongside     members of your team to get those questions answered and make the updates for you. The work gets done by a person who does it every day.
  • We act as your GIPS expert. When a new strategy launches, a policy needs revisiting, or a gray area comes up, you have someone who knows the standards and has seen the situation before.
  • We dig into your data. We look for outliers, accounts that are breaking composite rules, and other anomalies, before they end up in your reported performance and get caught in verification. Not only do we help identify potential issues, but we work with your team to help create the paper trail to provide an explanation if questioned by a verifier.
  • We help with system issues. When your system isn't producing what you need, we get inside it and help work out why.
  • We design the output. Once the data work is done, we turn it into beautifully designed, client-ready factsheets and reporting. And we understand this information from a performance, compliance, and design perspective.
  • We help you communicate what matters most. For your prospects or a board of directors: which statistics support your story, and which just add noise? Those are communication choices, and we help you make them.

None of this is advice delivered from a distance. We maywork with you as a remote team, but we're not remotely hands-off. We work insideyour data, your systems, and your deadlines, the same way a colleague down thehall would. And when something needs fixing, we roll up our sleeves and fix it,so it’s off your plate and your to-do list.

Ways to Work With Us

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Every firm is set up differently, so we don't force a single model.

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  • Fully outsourced. We run composite management on your behalf, start to finish. For firms without a dedicated performance team, this is often the cleanest answer.
  • Part of your team. We work alongside your people, taking on the pieces that are heavy, specialized, or just hard to staff. To your colleagues, we're simply part of the performance team.
  • Your GIPS expert on call. Your team runs the day-to-day, and we're there for the questions, reviews, and judgment calls that need someone who has seen it all before.
  • Your marketing team. Your data is done and ready to be put to work. We turn it into polished factsheets and reporting for prospects, consultants, and boards, and help you decide which parts of your story deserve the spotlight.

Many clients start in one place and shift as their needs change. That flexibility allows us to grow alongside you and offer as much or little support as you need.

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Why This Matters

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Most firms don't struggle with GIPS compliance because they misunderstand a requirement. They struggle because the knowledge lives in one person's head, the team is stretched thin, or a system issue has been quietly sitting in the queue for months.

Software doesn't fix any of those problems. People do. Having an experienced team involved reduces key-person risk, frees your own staff for higher-value work, and means fewer surprises when verification or a regulatory review comes around.

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A Question Worth Asking

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If the person who runs your performance work were out for a month, who would pick it up? And if the honest answer is "we'd figure it out" or you simply don’t have an answer, it may be time to think about who else should be in the room.

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We're happy to talk through where you are today and what kind of support would actually help. No software demo required. Email us at hello@longspeakadvisory.com.

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GIPS® is a registered trademark owned by CFA Institute. CFA Institute does not endorse or promote this organization, nor does it warrant the accuracy or quality of the content contained herein.

If you manage money for institutional clients, you've probably heard some version of this sentence: "We can't consider your strategy unless you're GIPS compliant." For a lot of investment managers, that's the moment the Global Investment Performance Standards (GIPS®) stop being an abstract industry term and start being a business requirement.

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This guide covers what GIPS compliance actually is, who needs it, what it takes to get there, and how to keep it running once you do. Wherever a topic deserves a deeper dive, we've linked to the longer article that covers it. Think of this as the map, with the detailed trail guides linked along the way.

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What Is GIPS Compliance?

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GIPS compliance means a firm calculates and presents its investment performance according to the GIPS which is a set of ethical, standardized rules for performance reporting created and administered by CFA Institute. At their core, the GIPS standards rest on two principles: fair representation and full disclosure.

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In practice, that means a GIPS compliant firm can't cherry-pick its best-performing accounts to show a prospect. It has to group similar portfolios into composites, present the full history honestly, disclose the assumptions behind the numbers, and apply the same rules consistently across the entire firm.

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GIPS compliance is voluntary. No regulator requires it. But it has become the closest thing the investment industry has to a common language for performance. This is often why so many institutional investors, consultants, and platforms require it before they'll even take a meeting.

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Who Needs to Be GIPS Compliant?

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Any investment manager who wants to compete for institutional business should take GIPS compliance seriously. That includes:

  • RIAs and asset managers pursuing institutional mandates (pensions, endowments, foundations, OCIOs)
  • Firms seeking placement on model delivery platforms, SMA platforms, or consultant databases
  • Managers responding to RFPs where GIPS compliance is a stated requirement
  • Firms that simply want a more defensible, standardized way to calculate and present performance — even without external pressure to do so

According to eVestment, roughly two out of three searches run by institutional investors and consultants in their database exclude firms that aren't GIPS compliant. If your strategy to scale your firm includes institutional or consultant-driven channels, GIPS compliance isn't optional in any practical sense, it's the price of admission.

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That said, don't mistake GIPS compliance for a purely institutional tool. Even firms with no institutional ambitions benefit from the discipline it offers: consistent calculation methodologies, documented policies, and a defensible and repeatable process for measuring performance. That rigor tends to pay off internally long before a prospect ever asks for it. And every additional firm that complies strengthens the credibility of the standards industry-wide, which benefits compliant firms and investors alike. The question worth asking isn't whether GIPS compliance is relevant to your business, it's whether now is the right time to embark on the path to become GIPS compliant.

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(Note: this guide focuses on investment managers. If you're an asset owner — a pension, endowment, or foundation — evaluating your own internal performance reporting, our asset owner GIPS compliance page covers considerations specific to that role.)

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Is GIPS Compliance Required?

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No. GIPS compliance is a voluntary standard, not a law or regulation, and the SEC doesn't require it. That part isn't where firms gettripped up.

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What's worth understanding is how close many firms already are to GIPS compliance without ever setting out to pursue it. The SEC Marketing Rule requires advertised performance to be fair and balanced, substantiated, and — in most cases — presented net of fees. Those requirements weren't written to mirror the GIPS standards, but in practice they've pushed firms toward much of the same discipline: consistent calculation methodology, defensible net-of-fee treatment, and documentation that can withstand scrutiny.

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That means a lot of SEC-registered advisers may already have some of the infrastructure GIPS compliance requires before they've ever considered pursuing it formally. If you're already calculating net returns consistently, applying one methodology across accounts rather than picking whatever looks best, and keeping documentation to back up what you advertise, the remaining work (constructing composites, writing the GIPS standards policies and procedures, and assembling GIPS Reports) is often a smaller lift than firms assume, especially if you hire a consultant like Longs Peak to help!

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The frameworks aren't identical, and there are places where they diverge. The GIPS standards permit either gross- or net-of-fee presentation, while the SEC Marketing Rule requires net returns whenever gross is shown; when local law or regulation is stricter than the GIPS standards, firms follow the stricter rule and disclose the deviation. We've written a full breakdown of how that reconciliation works, including sample disclosure language, in Navigating GIPS Compliance When Local Laws Conflict. But those are details to reconcile, not reasons to start from scratch.

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How to Become GIPS Compliant: The Building Blocks

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GIPS compliance rests on four core components, and implementation generally means building them in this order.

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1. Define the firm and scope the universe of portfolios. Compliance is claimed on a firm-wide basis, never at the composite, product, or portfolio level. Before anything else, a firm must define itself: which legal entities, offices, and business lines are included, and how the firm is held out to the public. This sounds simple but is often the most consequential decision in the entire process, especially for firms with multiple brands or affiliated entities. Once that's settled, inventory every account, pooled fund, and mandate that falls within the definition.

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2. Build the GIPS standards policies and procedures manual (the "P&P"). This is the operational rulebook: how discretion is defined, how composites are constructed, how cash flows are handled, how errors get corrected. A strong GIPS standards P&P reflects what the firm actually does, not what looks good on paper. Documenting it now, before it's tested by a real-world edge case, saves a lot of pain later.

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3. Construct composites and calculate performance. Discretionary portfolios with similar strategies are grouped into composites so performance is presented at the strategy level rather than as a cherry-picked account or model portfolio. Composite construction is typically where firms spend the most time, since it requires historical data review, judgment calls about discretion, and reconciliation across systems. Then asset-weight returns and calculate the required statistics for at least five years of compliant history(or since inception, if younger).

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4. Create GIPS Reports and file the compliance notification. The GIPS Report is the compliant, disclosure-rich presentation of a composite's performance that must be given to every prospective client. It includes required statistics, fee treatment, and disclosures that give context to the numbers. Once GIPS Reports are complete, the firm files the GIPS Compliance Notification Form with CFA Institute, a final required step before compliance can be claimed, and one that must be renewed annually.

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5. Verification (optional, but a good idea). An independent third party can test whether a firm's policies and procedures are designed appropriately and applied consistently firm-wide. It's not required, but it's widely expected in institutional circles (more on this below).

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We've written a full phase-by-phase walk through, including the judgment calls that tend to trip firms up (like defining discretion and handling historical composite membership), in A Practical Framework for Implementing the GIPS Standards.

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How long does this take? For most firms with a simple, straight forward structure, implementation can be complete in less than one month. For moderately complex firms or simple firms with longer track records, implementation often runs somewhere between three and six months from kickoff to a completed GIPS Report. Firms with complex legal structures, long historical track records, or messy underlying data should expect it to take longer. The upfront investment in earlier phases (firm definition and policy development) as well as the commitment from your team is what usually determines the timeline.

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How much will it cost? One of the questions we hear most often is "what does it cost to become GIPS compliant?" The honest answer is that it depends on a lot of inputs. Two firms of similar size can land in very different places depending on how many composites and accounts they manage, how many years of history must be reconstructed, how complete existing records are, how clean the underlying data is, and how much back-and-forth it takes to resolve open questions along the way. Because of that, we scope every engagement individually rather than pricing it off a flat rate card. The factors below are the ones that most reliably move the estimate up or down. Thinking through them ahead of time makes for a much more productive first conversation.

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What tends to drive cost:

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Composites and accounts in scope: How many strategies need to be reported on, and how many underlying accounts roll up into them? Being larger doesn’t always mean it will cost more, but we typically find that more accounts or composites often means more work to determine their proper placement.

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Years of history involved: Are you reconstructing several years (or since inception) of past performance or are you a brand-new firm just getting started? This becomes a bigger factor the longer the track record (which is often tied to data quality).

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Quality of existing records: How complete and well-organized is your historical composite membership documentation? This is often the biggest swing factor. We regularly see firms come in confident that their data is clean, only to find once we're in the weeds that it isn't. Being honest about this up front, even where the answer is "we're not totally sure," helps the entire engagement team start with the same expectations rather than discovering the real scope midstream.

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Verification plans: Do you intend to pursue verification alongside (or shortly after) the buildout? This adds coordination and review on top of the compliance work itself.

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Existing GIPS compliance experience: Are you starting from a blank page or do you already have some policies, procedures, or a prior composite performance to build on? The more existing foundation you have, the better.

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Responsiveness and internal bandwidth: How quickly will your team turn around data requests and answer questions? This affects the timeline most directly, but slow back-and-forth does add real hours too.

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We like to meet firms where they are. That might mean managing the full project or helping with the pieces that are most challenging or resource-intensive. We can usually find a way to add value even when a full-scope engagement doesn’t make sense. It’s also worth keeping in mind that some larger providers of managed services have minimum fees or engagement sizes, which may make them less practical depending on your needs and budget. If you’re still unsure if this is the right time, check out our post The Case for Pursuing GIPS Compliance Before You Think you Need It.

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Do You Need to Be Verified? No. Verification is voluntary under the GIPS standards. A firm can claim compliance without ever being verified.

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That said, verification is generally worth pursuing, particularly for firms competing for institutional mandates where GIPS compliance is treated as table stakes. Verification provides independent assurance that a firm's policies and procedures are designed in line with the GIPS standards and applied consistently — which carries real weight with consultants and prospects performing due diligence. It also tends to create useful internal discipline, since the expectation of independent review keeps processes tighter throughout the year.

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If you're earlier in your compliance journey or working within budget constraints, it's reasonable to build a solid compliance foundation first and pursue verification once the timing makes sense. For a detailed walkthrough of what the process actually involves, see our series, How to Survive a GIPS Verification.

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GIPS Compliance and the SEC Marketing Rule

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For US-registered investment advisers, GIPS compliance doesn't happen in a vacuum — it has to coexist with the SEC Marketing Rule. The two frameworks overlap in some places (both care about fair, substantiated, non-misleading performance) and diverge in others (fee treatment, required disclosures, what counts as an advertisement).

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Firms that manage this well tend to build one governance framework that covers both — rather than treating GIPS compliance and marketing rule compliance as separate workstreams run by different teams. We cover what that coordination looks like in practice, including how GIPS Reports, factsheets, and pitchbooks should stay consistent with each other, in What Good GIPS Compliance Governance Looks Like in Practice.

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Common Mistakes Investment Managers Make

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After helping firms through this process for over a decade, the same handful of issues come up again and again:

  • Treating GIPS compliance as a one-time project. Compliance is a firm-wide standard maintained continuously — not a binder that gets built once and shelved.
  • A "department of one." When all GIPS compliance knowledge lives with a single person, the firm is one departure away from a serious continuity problem.
  • Policies that don't reflect reality. A GIPS standards P&P that describes an idealized process — rather than what the firm actually does — creates real exposure during verification or a regulatory exam.
  • Weak documentation of judgment calls. Decisions about discretion, composite redefinitions, or benchmark changes need a paper trail, not just an outcome.
  • Underestimating the data work. Composite construction is as much a data reconciliation exercise as it is a compliance exercise. Firms that skip a thorough historical review often find problems later — usually during verification, which is the most expensive time to find them.

Maintaining Compliance: It Doesn't End at "Go-Live"

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Becoming compliant is a milestone. Staying compliant is the actual job. The most common breakdowns aren't dramatic, they're small process gaps that compound: a portfolio added to a composite late, a significant cashflow handled inconsistently, or a new strategy launched without a composite decision being made.

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The firms that stay clean build GIPS compliance into their regular monthly or quarterly performance cycle, assign clear ownership, and review their policies at least annually. We go deeper on what strong day-to-day governance looks like, including how to structure oversight without over-engineering it, in What Good GIPS Compliance Governance Looks Like in Practice.

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The Business Case for GIPS Compliance

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Compliance work rarely gets exciting attention internally, but the payoff is concrete. Firms that pursue GIPS compliance typically gain:

  • Access to platforms, consultant databases, and institutional searches that require it as a baseline
  • Credibility with allocators who use GIPS compliance as a proxy for operational rigor
  • Consistency across performance, marketing, and compliance teams that often didn't exist before
  • A cleaner foundation for scalability, since the process tends to surface and fix data issues before they become bigger problems

We've watched this play out directly with clients expanding into model delivery platforms and formalizing composite reporting for the first time. For real examples of how compliance translated into new business relationships, see From Compliance to Growth: How the GIPS Standards Help Investment Firms Unlock New Opportunities.

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Frequently Asked Questions

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What is GIPS compliance? GIPS compliance means a firm calculates and presents investment performance according to the Global Investment Performance Standards (GIPS®), a voluntary, globally recognized set of ethical standards administered by CFA Institute.

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Is GIPS compliance mandatory in the United States? No. It's voluntary. The SEC does not require GIPS compliance, though many institutional investors, consultants, and platforms require it as a practical condition of doing business.

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Who administers the GIPS standards? CFA Institute owns and administers the GIPS standards, including the GIPS Handbook, Guidance Statements, and the Q&A database that firms rely on for interpretive guidance.

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How long does it take to become GIPS compliant? Most firms with a straightforward structure can complete implementation in three to six months. Firms with complex legal structures, long track records, or significant data cleanup will typically need more time.

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What is a GIPS Report? A GIPS Report is the standardized, disclosure-rich presentation of a composite's or pooled fund's performance that a GIPS compliant firm must provide to every prospective client or investor.

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Is verification required? No, verification is optional. However, it's widely viewed as a meaningful credibility signal, particularly for firms pursuing institutional business, and many allocators expect it in practice.

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Can smaller firms become GIPS compliant? Yes. Firm size doesn't determine eligibility. Smaller firms often benefit from outsourcing implementation and ongoing maintenance to a consultant rather than building an internal GIPS compliance function from scratch.

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Does GIPS compliance replace the need to follow the SEC Marketing Rule? No. They're separate obligations. A firm can be GIPS compliant and still need to independently satisfy SEC Marketing Rule requirements, particularly around net-of-fee presentation and substantiation of claims.

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How Longs Peak Helps

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Becoming and maintaining GIPS compliance touches every part of a firm: performance, operations, compliance, and marketing. That's a lot to coordinate on top of running the business.

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At Longs Peak, we specialize in guiding investment managers through the entire journey. We help write policies and procedures, construct and maintain composites, prepare GIPS Reports, and manage the verification process alongside your chosen verifier. We've helped more than 250 firms and asset owners get there, and we stay with our clients well past go-live to keep compliance running smoothly year after year.

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If you're weighing whether GIPS compliance makes sense for your firm, or you're already compliant and want a second set of eyes on how it's being maintained, let's talk.

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GIPS® is a registered trademark owned by CFA Institute. CFA Institute does not endorse or promote this organization, nor does it warrant the accuracy or quality of the content contained herein.

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