To help provide comparable, verified performance figures, a set of voluntary standards for investment performance presentation has evolved under the guidance of the Investment Performance Council. These standards are known as the Global Investment Performance Standards, or GIPS. An important goal of the council is to maintain and enhance the reputation of the investment management profession and its practitioners. In this role the council has developed GIPS for the fair, accurate, and complete presentation of firm performance information to prospective clients.
The standards contain generic provisions applicable to all managers and asset classes and some requirements specific to particular asset classes such as Real Estate and Venture Capital. In addition there are supplements covering the independent auditing of the presentations and rules on making claims of compliance within advertisements.
Performance presented according to the standards is for a composite, or an aggregate, of portfolio returns where there is one composite return presented for each investment strategy offered by the firm. The standards presume that the firm manages one or more investment strategies with one or more client account or funds invested in a particular strategy. The composites serve to aggregate performance for each fund managed according to the same objective.
The standards require that all of the firm's assets under management be accounted for in a composite wherever the manager has investment discretion over the assets and there is a client paying fees for the management of the account.
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