Key Takeaways from the 2020 GIPS® Standards Virtual Conference

November 11, 2020
15 min
Key Takeaways from the 2020 GIPS® Standards Virtual Conference

The week of October 26th, CFA Institute hosted the 24th annual GIPS Conference. It was the first of its kind, with speakers presenting virtually from the comfort of their own homes and offices.

Most of this year’s conference was focused on compliance with the 2020 GIPS standards, as well as important discussions around US-specific (SEC) regulatory compliance and ESG performance. Below are some key takeaways from this three-day event.

Specific Takeaways Relating to GIPS Compliance

The 2020 GIPS standards were released at the end of June 2019, so the industry has had some time to absorb the updates that were made. All changes firms are required to make must be completed before presenting performance for periods including 31 December 2020 in the firm’s GIPS Reports.

With the end of 2020 fast approaching, the conversion to the 2020 standards was the focus of this year’s conference. We have previously published information relating to converting your GIPS Reports and Policies and Procedures for GIPS 2020 so we will not repeat that all here, but below are some of the key points that were emphasized during the conference:

Broad vs. Limited Distribution Pooled Funds

The treatment of pooled funds is one of the most significant changes made to the GIPS standards for 2020. Since the requirements for how pooled funds are treated differ depending on whether they are classified as Broad Distribution Pooled Funds (“BDPF”) or Limited Distribution Pooled Funds (“LDPF”), the speakers emphasized how to distinguish between the two.

Pooled funds are different than segregated accounts in that their ownership interests may be held by more than one investor. A BDPF is regulated in a way that permits the general public to purchase or hold the fund’s shares, and this type of pooled fund is not exclusively offered in one-on-one presentations. On the other hand, a LDPF is any pooled fund that does not fit into the category of a BDPF.

The classification between the two types of pooled funds is made at the fund level rather than the share class level. Some common examples of BDPFs include pooled funds with at least one retail share class and pooled funds with shares traded on an exchange. The most common BDPFs in the U.S. are mutual funds. LDPFs include any pooled fund that a firm offers exclusively in one-on-one presentations.

The distinction between the types of pooled funds is important because there are different requirements that need to be met depending on whether the fund is a BDPF or LDPF. Specifically, firms are not required to provide a GIPS Report to BDPF prospective investors, but they must make every reasonable effort to provide a GIPS Report to all LDPF prospective investors when they initially become a prospect and every twelve months thereafter for as long as they remain a prospective investor.

The GIPS Report provided to LDPF prospective investors can be either a GIPS Pooled Fund Report or a GIPS Composite Report for the composite in which the LDPF is included. Regardless of which is provided, the report must disclose the fees specific to the fund including the fund’s total expense ratio. Firms choosing not to create a separate GIPS Pooled Fund Report may wish to maintain multiple versions of their GIPS Composite Report so a version with pooled fund fees can be provided to prospective pooled fund investors and a version with just management fees can be provided to prospective segregated account clients.

Firms Must Gain an Understanding of their Verifier’s Policies for Maintaining Independence

Independence is an important topic relating to GIPS verification. Ensuring that verifiers do not step into a management role, set policies, calculate returns, etc. is essential for the verification to be meaningful. Only when the verifier remains independent will the verification letter truly represent the opinion of an unbiased third-party.

Firms are not required to be verified but investing in verification brings additional credibility to a firm's claim of compliance. At the GIPS Conference, the speakers emphasized that under the 2020 GIPS standards, if a firm chooses to be verified it must:

  1. Gain an understanding of the verifier’s policies for maintaining independence.
  2. Consider the verifier’s assessment of independence.

This is an ongoing process, and these steps must be performed with each verification engagement. To properly adhere to these requirements, firms should obtain a summary of the verifier’s policies for ensuring independence and have sufficient discussions with the verifier to understand the policies and identify any conflicts of interest.

When issues come up that require the help of GIPS expert, utilizing the help of an independent GIPS consultant, such as Longs Peak, rather than the firm’s verifier helps ensure the verifier’s independence is not jeopardized.

Requirement to Maintain a GIPS Report Distribution Log

Firms have always been required to make every reasonable effort to distribute GIPS Reports to prospects; however, under the 2020 GIPS standards, firms are now also required to demonstrate their effort to do so.

The speakers at the conference emphasized that not only is it now required to demonstrate this effort, but verifiers will be testing this. This means that firms should track the distribution in a manner that can be easily converted into a report to provide to their verifier. There is no specific requirement as to how this is tracked, but the most common is to log the relevant information into a CRM database or in a spreadsheet if a CRM is not used.

Next Steps for CFA Institute

CFA Institute is constantly updating their resources related to the GIPS standards and will continue to do so. During the conference, a list of “next steps” was discussed.

  1. The Q&A Database will be updated to ensure the current Q&As are relevant to the 2020 standards. Q&As that are no longer relevant will be archived.
  2. Existing Guidance Statements will be updated to ensure they adhere to the 2020 standards.
  3. CFA Institute is in the process of finalizing exposure draft Guidance Statements related to benchmarks, overlay strategies, risk, and supplemental information.
  4. The creation of tools and resources to assist with implementation of the 2020 edition of the GIPS standards will continue. Updates on new tools/resources will be posted on the CFA Institute website as well as announced in monthly emails. To subscribe to the GIPS standards newsletter please follow instructions here.

Regulatory (SEC) Compliance Takeaways

The SEC's Proposed New Advertising Rule

The main focus of the SEC compliance portion of the conference was to discuss the proposed new Advertising Rule. The new Advertising Rule should be finalized in the next couple months, and firms will have one year to comply once it is finalized.

Historically, firms have relied on “No-Action Letters” and other interpretive guidance to ensure advertisements do not violate SEC requirements. The new Advertising Rule is expected to consolidate this miscellaneous guidance into a set of principles-based provisions with an overarching emphasis on ensuring advertisements are fair and balanced.

Some of the key elements of the proposed new Advertising Rule are below.

  • As proposed, the definition of “advertisement” will be broadened to include “any communication, disseminated by any means, by or on behalf of an investment adviser, that offers or promotes the investment adviser’s investment advisory services or that seeks to obtain or retain one or more investment advisory clients or investors in any pooled fund vehicle advised by the investment adviser.”  While there will be certain exclusions, this essentially broadens the definition to include all promotional emails, text messages, and any pre-recorded podcasts. It also makes the firm responsible for ensuring that any third-party content promoting advisory services on behalf of the firm also adheres to the Advertising Rule.
  • The proposed rule prohibits advertisements from including performance results from fewer than all portfolios with substantially similar investment policies, procedures, objectives, and strategies, with limited exceptions. This better aligns the SEC rules with the GIPS standards, as it moves firms towards composite construction rather than using representative accounts. There do appear to be exceptions to the rule where representative accounts could be used as long as the return of the representative account is no higher than the average return of all portfolios managed with the same strategy; however, this could be difficult to support without calculating the composite returns. We expect that composite returns will become the norm, even for firms not complying with the GIPS standards.
  • The new rule also emphasizes the requirement of pre-use review and approval of all advertisements prior to dissemination. This review and approval can be designated to one or more employees with the competence and knowledge regarding the requirements, and the designated employee(s) should generally include legal or compliance personnel. Exclusions from this rule would include live oral communications that are not widely broadcast and communications disseminated only to a single person or household or to a single investor in a pooled fund vehicle.

Once this new Advertising Rule is finalized, advisers can use the one-year transition period to develop and adopt appropriate policies and procedures to comply with the new rule. Since the new rule is not yet finalized, no immediate action is required at this time other than starting to consider what changes will likely be necessary for your firm.

ESG Takeaways

As ESG-based investing has become increasingly popular, the GIPS Conference included a session discussing ESG performance attribution. Environmental, Social, and Governance (“ESG”) refers to three of the main factors in measuring the sustainability and societal impact of an investment. Measuring ESG essentially refers to measuring how much of an investment’s performance can be attributed to ESG considerations in the investment process.

Sources of ESG Data

ESG data has evolved over time, and there are multiple categories of sources. The main sources used historically are Corporate Governance Disclosures as well as news and media sources. A very systematic quality control process of evaluating ESG data needs to be in place to properly interpret the data.

Some of the sources that are becoming increasingly available are alternative data sources, such as government regulatory agency databases and models for ESG metrics. Data from alternative sources requires expertise to extract and properly shape in order for the data to be useful.

Materiality of ESG Data

ESG data is generally not very uniform or standardized, and there are biases that exist across the various sources. Discussions during the ESG portion of the conference compared the current state of ESG data to financial data of the past. There was a period of time when financial data was in this “messy” state before reporting standards were put in place and the process of unifying global financial data was undertaken. ESG data is expected to follow a similar path.

Zeroing in on what is material and what factors matter while evaluating a company is an important part of the investment process. There are many factors to consider while assessing ESG inputs, but determining the key factors relevant to any given business model is essential.

Conclusion

Overall, the GIPS Conference was a success despite not being able to meet in person. The networking is always a fun and important aspect of the conference, but the virtual conference still was able to provide useful practical tips for implementing the 2020 GIPS standards as well as other related performance topics.

If you have any questions about the GIPS Conference or GIPS and performance in general, please feel free to contact us.

Recommended Post

View All Articles

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.

‍

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

‍

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.

‍

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

‍

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.

‍

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.

‍

What We Actually Do

‍

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

‍

  • 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

‍

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

‍

  • 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.

‍

Why This Matters

‍

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.

‍

A Question Worth Asking

‍

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.

‍

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.

‍

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.

‍

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.

‍

What Is GIPS Compliance?

‍

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.

‍

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.

‍

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.

‍

Who Needs to Be GIPS Compliant?

‍

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.

‍

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.

‍

(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.)

‍

Is GIPS Compliance Required?

‍

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.

‍

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.

‍

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!

‍

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.

‍

How to Become GIPS Compliant: The Building Blocks

‍

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

‍

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.

‍

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.

‍

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).

‍

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.

‍

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).

‍

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.

‍

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.

‍

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.

‍

What tends to drive cost:

‍

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.

‍

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).

‍

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.

‍

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.

‍

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.

‍

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.

‍

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.

‍

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

‍

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.

‍

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.

‍

GIPS Compliance and the SEC Marketing Rule

‍

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).

‍

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.

‍

Common Mistakes Investment Managers Make

‍

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"

‍

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.

‍

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.

‍

The Business Case for GIPS Compliance

‍

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.

‍

Frequently Asked Questions

‍

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.

‍

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.

‍

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.

‍

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.

‍

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.

‍

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.

‍

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.

‍

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.

‍

How Longs Peak Helps

‍

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.

‍

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.

‍

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.

‍

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.

‍

Most managers assume that losing an allocation comes down to returns. Underperform the benchmark, underperform peers, and the mandate goes elsewhere. That happens, but it's not usually the reason a manager gets cut from a search after the numbers already looked competitive.

‍

More often, it's something in how the performance was presented that made an allocator hesitate. A number that didn't match across two documents. A risk statistic nobody could explain. A question in due diligence that the manager couldn't answer cleanly. None of these are calculation errors. They're trust problems, and trust is what allocators are ultimately seeking when they write a check.

‍

Here are the performance problems we see that cost managers allocations most often, and none of them start with the returns themselves.

‍

The Numbers Don't Match Across Documents

‍

An allocator pulls up your factsheet, your pitchbook, and your GIPS® Composite Report, and the composite's five-year return isn't quite the same in all three. Maybe it's a rounding difference, or the factsheet reflects a different "as of" date. The allocator doesn't know that, and they aren't going to assume the best. Inconsistency reads as carelessness, and carelessness in performance reporting raises an obvious question: what else isn't being checked?

‍

This is why we push firms to treat marketing and GIPS compliance as one coordinated process rather than two departments working from different source files. Every document that leaves the building should trace back to the same underlying data.

‍

This matters even more now that due diligence itself is being automated. Operational due diligence teams and consultants are increasingly running AI tools that cross-check pitchbooks, factsheets, DDQs, and regulatory filings against each other, flagging contradictions that used to slip through manual review. A rounding difference or a stale figure that a person might have missed a few years ago is exactly the kind of inconsistency these tools are built to catch instantly. Clean, consistent marketing materials aren't just good practice anymore — they're what it takes to pass a review that may happen before a person ever looks at your numbers.

‍

Performance That Looks Selected, Not Reported

‍

Showing your best-performing account, your best-performing period, or a composite with an unusually small number of accounts invites the question every allocator is trained to ask: what am I not being shown? Due diligence teams know that everyone can't be top quartile. The SEC Marketing Rule's anti-cherry-picking provisions exist because this pattern is common enough that regulators built rules around it, and sophisticated allocators are watching for it. If your performance can be read as overly flattering rather than representative, assume a diligence team will read it that way.

‍

Wanting to lead with your best numbers is an understandable impulse. But diligence teams are trained specifically to spot it, and selective disclosure, even when every number in it is accurate, tends to read as a bigger warning sign than an honest, complete track record would. The stronger story is discipline: the periods where you held to your stated mandate and didn't deviate even while returns lagged. That's a harder story to tell than "we outperformed," but it's the one that actually holds up, because it shows you didn't drift toward whatever was working elsewhere just to keep pace. Chasing returns outside your stated process isn't skill, it's strategy drift, and allocators are trained to spot that just as readily as cherry-picked out performance.

‍

Our advice: resist the instinct to lead with your best examples, and show the scenarios that build trust instead. We recommend showing the ones that demonstrate you stuck to your stated mandate, policies, and procedures, especially when the outcome wasn't your best quarter. Discipline under pressure is a more durable credential than a strong one-off time period, and it's the kind of evidence that holds up long after that number is forgotten.

‍

Statistics You Show But Can't Explain

‍

A page full of risk statistics doesn't build confidence on its own. It invites a follow-up question, and if the manager can't explain what a downside capture ratio of 85% says about the decisions actually made in the portfolio, the statistic becomes a liability instead of an asset. Allocators aren't just checking whether the numbers are favorable. They're checking whether the manager understands their own portfolio well enough to explain it. Statistics presented without interpretation signal that the second answer is “no.”

‍

Likewise, a page of portfolio characteristics that have nothing to do with how the strategy is actually run are not doing you any favors. If you're not making decisions at the sector level, a sector breakdown doesn't tell an allocator anything about your process. If you don't manage individual position sizing, a top-ten holdings list is not adding value.

‍

Your factsheet should be a roadmap for the conversation you want to have, not a checklist of everything other managers include. Every number on it should be something you can explain: how it got there, what decision it reflects, and what it says about how you manage money. A statistic that's only there because everyone else shows it likely isn't helping you if it doesn’t demonstrate active decision making. It's inviting a question you may not have a good answer to.

‍

It's the same logic as a good resume. One padded with every certification, hobby, and unrelated past role doesn't read as impressive, it reads as overwhelming and maybe irrelevant, and it makes the reader work harder to find what actually matters to the job at hand. A factsheet works the same way. The strongest ones include only what's relevant to the case being made and make it easy to connect every line back to it.

‍

No One Can Explain Why a Decision Was Made

‍

This is the one that costs managers the most, and it's rarely about the numbers at all. An allocator asks why a composite was redefined, why a benchmark changed, or why a particular account was excluded, and the answer is a shrug or "that's how we've always done it." Undocumented decisions create the impression that performance is being managed reactively rather than governed intentionally. Firms that can point to a clear, contemporaneous record of why a judgment call was made close that conversation quickly. Firms that can't do this will leave the allocator wondering what other judgment calls haven't been documented either.

‍

The Common Thread

‍

None of these problems are really about whether the strategy performed well. It comes down to whether the story behind the numbers holds up consistently under scrutiny. Allocators aren't just buying returns. They're also buying confidence that what they're being shown today will still be true, and still explainable, a year from now.

‍

The fix isn't more disclosure for its own sake. It's making sure everything across your performance reporting tells the same, well-documented story before an allocator ever has the chance to ask why it doesn't.

‍

‍

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.