Firms claiming compliance with the Global Investment Performance Standards (GIPS®) are required to submit an annual GIPS Report for distribution to prospective clients and investors. However, CFA Institute recommends updating the report on a quarterly or semi-annual basis. Many firms include annual time-weighted returns or since inception money-weighted returns, which are required only to be current to Dec. 31, 2019. In response to recent challenges and operational changes due to COVID-19, CFA Institute issued guidance to address performance reporting during this time.
- The GIPS standards require disclosure of significant events in GIPS Reports to explain the effects of the event on the firm and a pooled fund or composite’s strategy.
- A description of the composite or pooled fund must be included with enough information about the investment mandate, objective, or strategy to allow a prospect to understand its key characteristics; this should include:
- Material risks of the strategy;
- If part of the strategy, how leverage, derivative, and short positions are used; and
- Whether illiquid investments are a material part of the strategy.
- CFA Institute recommends reviewing GIPS Reports mid-year to modify reports, if needed, and to include any necessary disclosure language.
- Other revisions may entail adding year-to-date performance information to show how a composite or pooled fund’s strategy is performing during the pandemic.
Changes to your firm’s policies regarding performance presentation are essential during this time. Fairview Performance Services is here to be your GIPS compliance partner. We will keep you updated with guidance issued by CFA Institute in response to the COVID-19 pandemic. Contact us with questions about how to modify your firm’s GIPS Reports to address the current circumstances.