Definition of the Firm

It is intended that GIPS compliance be available to any firm. A firm must comply with GIPS on a firm-wide basis to claim compliance with the standards. All actual, fee-paying, discretionary portfolios managed by the firm must be included in the performance-measurement process.

To be in compliance, an entity must state how it defines itself as a firm.

• A firm may be defined as an investment firm, subsidiary or division held out to be a distinct business unit for managing investment assets. It could be part of a larger organization.
• Total firm assets must be the aggregate of the fair value of all discretionary and nondiscretionary assets under management within the defined firm. This includes both fee-paying and non-fee-paying assets.
• Firms must include the performance of assets assigned to a sub-advisor in a composite, provided that the firm has discretion over the selection of the sub-advisor.
• Changes in a firm's organization are not permitted to lead to alteration of historical composite results.

Historical Performance Record

Firms should present their long-term performance records. To be in compliance, a firm must:

• Initially present a minimum of five years of compliant annual investment performance results, except for composites which have been in existence for less than five years (in which case, composite performance since inception must be presented).
• Add an additional year of compliant performance results each year until they reach 10 years of results.

The goal is to have 10 years of GIPS-compliant performance results presented. To encourage firms to participate, GIPS only requires five years of data to initially come into compliance, allowing the full 10 years of performance results to be built over time. There is nothing to prevent a firm from initially presenting a full 10 years of compliance results. To maintain compliance, a firm presenting less than 10 years of performance results must increase the number of years of performance results presented.

Claim of Compliance

Which version of GIPS standards should firms comply with?

The revised GIPS standards were adopted in 2010 and became effective on January 1, 2011. Although early adoption of these revised GIPS standards is encouraged, firms can still use the old version for performance presentations that include results through December 31, 2010.

In order to claim compliance, a firm must meet ALL the requirements set forth in GIPS. Firms that fully comply with GIPS may use the following compliance statement in their performance presentations: "[Name of the firm] has prepared and presented this report in compliance with the Global Investment Performance Standards (GIPS)."

With regard to compliance, a firm is either in compliance or not in compliance. Firms may not make any claims to being "in compliance except for..."

Appropriate disclosure when the GIPS standards and local regulations are in conflict:

GIPS standards serve as minimum worldwide standards. If local laws are stricter than GIPS, local laws should be applied. If local laws don't exist or are less strict than the GIPS, the GIPS should apply. In cases of conflicts with GIPS, the standards require that local laws and regulations take precedence over GIPS.

Firms should disclose any conflicts.