Gips Reporting

Section: GIPS Reporting in Practice Estimated study time: 45 minutes Content: GIPS reporting is the formal process by which investment management firms present composite performance to prospective and existing clients. Understanding GIPS at Level 3 requires going beyond the rules covered in the Ethics section and applying them to realistic reporting scenarios — distinguishing required from recommended elements, identifying errors in sample presentations, and understanding the interaction between GIPS and the broader performance evaluation framework. A GIPS-compliant composite presentation must include a minimum of five years of annual performance history, building to ten years as the composite ages. For composites with less than five years of history, all available history since inception must be presented. Returns must be presented for each annual period — monthly returns are not required. Any period less than one year (e.g., a composite created six months ago) must present returns since inception and must not annualize those returns. Required disclosures that are frequently tested include: (1) a statement that the firm claims compliance with GIPS (must appear in every compliant presentation); (2) the composite creation date (when the composite was first created by the firm); (3) the definition of "firm" as used in the composite; (4) the composite description and strategy; (5) the benchmark used and a reason if no benchmark is shown; (6) the currency used; (7) gross-of-fees or net-of-fees returns (both must be disclosed for the same period); (8) the composite's internal dispersion measure (for periods with five or more portfolios); (9) the number of portfolios in the composite; and (10) composite assets as a percentage of total firm assets. Recommended disclosures (not required) include: presenting both gross and net of fees…