2015, Study Session # 1, Reading # 3

INTRODUCTION TO THE GLOBAL INVESTMENT

PERFORMANCE STANDARDS (GIPS)
3. a

Historical Misleading Reporting Procedures

Representative Accounts
Top-performing portfolio
representative of firms
overall investment results.

Survivorship Bias

Varying Time Periods

Excluding weak
performance accounts.

Showing excellent
performance of selected
time periods.

GIPS set of ethical principles (standardized, industrywide & voluntarily followed by firms).

Clients have more confidence in reported performance &
can easily compare investment firms performances.

3. b

Composite grouping of individual discretionary portfolios representing

a similar investment strategy, objective or mandate.

Provide information about investment style results & various types of
securities being managed.

Each portfolio is assigned to a composite before its performance is known
(no intentional superior composite creation).

3. c

Verification

Requirements

Recommendations

Performed by independent third party

(firm-wide basis).

Verifier must attest;

Firm has compiled with composite
construction requirements.

Firms policies and procedures are
designed to present and calculate
performance in accordance with the
GIPS standards.

Firms are encouraged to pursue

independent verification.

Disclosure language;

[insert name of firm] has been verified
for the periods [insert dates] by [name of
verifier]. A copy of the verification report
is available upon request.

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