Introduction to the Global Investment Performance Standards (GIPS)

Introduction

The objective of this reading is to provide candidates with an orientation to the GIPS standards. It explains why the GIPS standards were created, who can claim compliance, and who benefits from compliance. It also covers key concepts of the GIPS standards—composites, the definition of the firm, and the definition of investment discretion. Finally, the reading briefly discusses the purpose and benefits of verification. Upon completion of this reading, candidates should appreciate the benefits of an industry-wide set of standards for calculating and presenting investment performance based on the principles of fair representation and full disclosure.

The member should be able to:

1. explain why the GIPS standards were created, what parties the GIPS standards apply to, and who is benefitted by the standards;

2. describe the key concepts of the GIPS standards for firms;

3. explain the purpose of composites in performance reporting;

4. describe the fundamentals of compliance, including the recommendations of the GIPS Standards with respect to the definition of the firm and the firm’s definition of discretion;

5. describe the concept of independent verification.