Standards for Global Investment Performance (GIPS): Definition and Applications

Standards for Global Investment Performance (GIPS): Definition and Applications

Having a Clear and Fair Picture: Global Investment Performance Standards (GIPS)

Don't get sucked into the complexity of investment performance numbers – Global Investment Performance Standards (GIPS) is here to simplify things for you!

What Are Global Investment Performance Standards (GIPS)?

Imagine a universal language for investors to understand and compare investment managers' performance. That's exactly what GIPS offers!

GIPS is a set of essential guidelines made by the CFA Institute (previously known as the Association for Investment Management and Research) to ensure fair and consistent representation of investment performance. These standards are widely adopted by investment managers across the globe.

GIPS' Key Benefits

• Full Disclosure: GIPS regulations promote complete disclosure to help you make informed decisions, allowing you to compare one firm's results with another with ease.
• Transparency: The standards abolish ghost portfolios and hidden data, improving transparency and reducing the chances of deception.
• Adaptability: GIPS evolves with the ever-changing investment landscape, ensuring its guidelines remain relevant and effective in the dynamic financial world.
• Desirable Reputation: Firms demonstrating adherence to GIPS principles build credibility, making it easier for them to expand their businesses across various countries.

The Evolution of GIPS

GIPS had its beginnings with the Association for Investment Management and Research-Performance Presentation Standards (AIMR-PPS) in 1987 for U.S. and Canadian investment firms. In response to the demand for a broader set of principles, the CFA Institute introduced Global Investment Performance Standards in 1999. A revised set of guidelines was approved in 2005 to create a unified global standard for investment performance and replace country-specific performance standards.

The latest edition of Global Investment Performance Standards was launched on June 30, 2019, and came into effect on Jan. 1, 2020. GIPS is currently used across 50 markets globally, and the top 25 asset managers worldwide claim compliance with GIPS standards.

In other words, if an investment firm boasts about being GIPS compliant, you know they're putting in the time and effort to provide you with transparent and reliable performance information.

Ready to dominate the market? Start your investing journey at [Your Favorite Investing Platform] today.

The Shady Side of Investments - Ingredients to watch out for

While navigating the investment landscape, you might come across sneaky investment practices, such as:

• Cherry-picking: Investment managers hand-select top-performing portfolios to present to you, leaving other poor-performing ones unmentioned.
• Survivorship bias: Managers may present data from only existing portfolios without considering the impact of the portfolios that didn't survive the test of time.

GIPS aims to eliminate such deceptive practices through its guidelines and verification process.

So, the next time you evaluate an investment manager, look for GIPS compliance, confidence, and trust in their footsteps.

• In the dynamic world of finance, Global Investment Performance Standards (GIPS) plays a crucial role in trading and investing markets, ensuring fair and consistent representation of investment performance by investment managers who adhere to its principles.
• By following the GIPS guidelines, investment managers can demonstrate transparency in their operations, eliminating ghost portfolios and hidden data, making it easier for investors to make informed decisions when comparing firms' performance.
• In the decentralized finance (DeFi) landscape, GIPS can potentially provide a universal language for evaluating the performance of DeFi projects, such as token trading, thereby promoting investor confidence and liquidity.
• By embracing the GIPS standards, investment businesses can build a reputation for credibility and expand their operations across various countries, providing a competitive edge in the global market.

Read also: