GIPS 2020: GLOBAL INVESTMENT PERFORMANCE STANDARDS

 

EXTERNAL ARTICLE

Estimated reading time: 4 min.

 

WHY GIPS MATTERS

The Global Investment Performance Standards (GIPS®) ensure transparency and comparability in investment performance reporting. Differences in local regulations and calculation practices previously made it difficult for investors to assess fund performance consistently, creating an uneven playing field for asset managers.

In 1995, the CFA Institute developed GIPS to provide:

  • Transparent information for investors to make informed comparisons.
  • Fair competition for asset managers through standardized reporting practices.


 

Resources: GIPS standards, GIPS handbook, guidance statements and AIMR-PPS.


A STANDARD SHAPED BY MARKET EVOLUTION

Since their introduction, the GIPS standards have continuously evolved to reflect changes in markets, asset classes, and investor expectations:

  • 1999: first version introduced, allowing limited local variations.

  • 2005: single global framework eliminating local differences.

  • 2010: enhanced comparability with firm-wide application, fair value principles, and standardized return calculations.

 


Additional resources: GIPS 2010 Q&A


ADAPTING TO TODAY'S NEEDS AND TOMORROW'S CHALLENGES

To remain relevant, GIPS is designed as an evolving standard. As the asset management industry changes, provisions that are no longer necessary are removed, while new requirements and recommendations are added to promote best practices.

The 2020 revision introduced by the CFA Institute had three main objectives:

  • Integration: harmonize rules and recommendations issued since 2010.

  • Accessibility: facilitate adoption by private management companies and alternative investment funds (private equity, real estate…).

  • Clarity: publish three separate guides dedicated to asset managers (“firms”), institutional investors (“asset owners”), and auditors.

 


Learn more: CFA: 2020 GIPS Standards


GIPS 2020

Released in June 2019 and effective from January 2020, the latest version addresses structural shifts in asset management — such as pooled funds and flexible cash management — and introduces updated terminology and methodologies.

Terminology updates:

  • “Transaction costs” replaces “trading costs”

  • “Wrap fee portfolios” replaces “wrap fees/separately managed accounts”

  • “GIPS reports” replaces “compliant presentations”

Methodology updates:

  • Pooled funds now have distinct reports, not requiring inclusion in a composite.

  • Carve-outs reintroduced for cash management flexibility.

  • Transaction costs may be estimated rather than actual.

  • Returns: Money-Weighted Returns (MWR) can be used instead of Time-Weighted Returns (TWR).

 


Further reading: CFA: 2020 GIPS standards, Spaulding Group: 2020 GIPS standards’ highlights, Deloitte: A new impetus for GIPS standards (PDF, p.40).


AN ADAPTIVE AND INCLUSIVE STANDARD

The 2020 update provides practical guidance for firms, asset owners, and verifiers, streamlines provisions for alternative investments, and continues to serve as a global benchmark for best practices in performance reporting.

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