The overall purpose of GIPS is to provide guidelines for fair and full disclosure of investment performance. This will allow current and potential clients to properly interpret investment results over time and between firms.

There are four goals of GIPS:

• Bolster investor confidence by ensuring the completeness, fairness, and standardization of calculation and presentation of investment performance on a global basis.
• Serve as a minimum standard to which all investment managers in the world should adhere.
• Enable global investment management firms to present performance results that are comparable with firms in other countries.
• Facilitate communications between investment managers and their prospective clients on evaluating historical performance results and developing future strategies.

In 1999, the Investment Performance Council (IPC) was created to provide an implementation structure for the GIPS standards. All countries are encouraged to adopt the GIPS standards as the common method for calculating and presenting investment performance. When applicable local or country-specific laws or regulations conflict with the GIPS standards, firms should comply with the GIPS standards in addition to those local requirements.

As of January 2010, more than 32 countries had adopted or were in the process of adopting the GIPS standards.

Now IPC is entering its second phase of the convergence strategy to the GIPS standards: to evolve the GIPS standards to incorporate local best practices from all regional standards.

Vision Statement

A global investment performance standard leads to readily accepted presentations of investment performance that

• present performance results that are readily comparable among investment managers, without regard to geographic location, and
• facilitate a dialogue between investment managers and their prospective clients about the critical issues of how the manager achieved performance results and future investment strategies.

Objectives

• Obtain worldwide acceptance of a standard for the calculation and presentation of investment performance in a fair, comparable format that provides full disclosure.
• Ensure accurate and consistent investment and performance data for reporting, record keeping, marketing, and presentation.
• Promote fair, global competition among investment firms for all markets without creating barriers to entry for new firms.
• Foster a notion of industry self-regulation on a global basis.

Key Characteristics

• Firm definition: a direct business entity.
• GIPS are ethical standards, not legal standards, for performance presentation. The objective is to present performance results fairly and with full disclosure.
• Composites: All actual, fee-paying, discretionary portfolios must be included in at least one composite.
• Calculation and presentation requirements.
• The integrity of input data.
• There are two components: requirements and recommendations.
• Appropriate disclosure when local laws or regulations conflict with the standards.
• The eight sections of GIPS standards.
• The standards will evolve to address new aspects of investment performance.