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.
EXPLORE MORE ARTICLES
COMMON QUESTIONS ABOUT THIS TOPIC
Title
What are the GIPS 2020 standards and why are they important?
The GIPS 2020 standards are the latest global-voluntary framework from the CFA Institute for calculating and presenting investment performance in a fair, comparable and transparent manner. They help investors assess fund performance consistently across firms and geographies.
Title
What are the key changes introduced in the 2020 edition of GIPS?
Important changes include: (a) separate standards for firms, asset owners and verifiers; (b) expanded provisions for pooled funds (broad- and limited-distribution); (c) allowance of money-weighted returns (MWR) under defined conditions instead of solely time-weighted returns (TWR); (d) clearer definitions (e.g., “transaction costs” vs “trading costs”).
Title
Who must comply with GIPS 2020 and when did it become effective?
Compliance is voluntary but widely adopted. It applies to investment firms (claiming compliance), asset owners and verifiers. The 2020 edition was released in June 2019 and became effective for performance periods ending on or after 31 December 2020 (i.e., from January 2020 onwards).
Title
What benefits do asset managers and asset owners gain by adopting GIPS 2020?
Adopting GIPS 2020 demonstrates best-practice performance reporting, enhances credibility with investors, enables global comparability of performance records, supports marketing efforts and reduces risk of misleading disclosures.
Title
What are key implementation considerations for firms adopting GIPS 2020?
Firms need to update their policies and procedures (e.g., valuation, composite construction, pooled fund inclusion), perform a gap analysis, adapt composite definitions and returns calculation (TWR/MWR), review reporting templates and ensure disclosures comply with the new standards.