CFA Institute unveils new global investment standards

The comprehensive update considers the growing relevance of alternative investment strategies and pooled funds

CFA Institute unveils new global investment standards

The CFA Institute has released the 2020 edition of its Global Investment Performance Standards (GIPS). Set to take effect on January 1, the standards lay out industry-wide ethical principles to guide investment managers and asset owners in calculating and presenting their investment results fairly.

The new principles have come following a public consultation that yielded more than 120 comment letters. It also incorporates authoritative guidance that has been issued since the last comprehensive update in 2010.

“This update evolves the GIPS standards to reflect the many changes and innovations the investment industry has seen in recent years, particularly adding relevance for managers of alternative investment strategies and pooled funds,” said Karyn Vincent, CFA, CIPM, head of global industry standards at CFA Institute. “We believe the changes will empower more investment managers and asset owners to embrace investment performance transparency and industry-wide comparability.”

The 2010 edition of the GIPS standards were focused solely on firms, though both firms and asset owners were able to comply with them. Building on the institute’s 2014 Guidance Statement on the Application of GIPS standards to Asset Owners — which was updated in 2017 — the 2020 update to the standards includes provisions specific to asset owners.

“Rather than having one document that included the provisions for both firms and asset owners, as well as guidance for verifiers, we separated the GIPS standards into three separate documents (chapters): one for firms, one for asset owners, and one for verifiers,” the institute said.

Other notable features of the 2020 GIPS standards include:

  • Greater relevance to a broader range of asset types owing to a shift in focus from asset classes to account structure;
  • Flexibility to choose between using money-weighted returns (MWR) instead of time-weighted returns (TWR), whichever is most appropriate for the account structure, under certain conditions;
  • Enhanced ability for firms to present pooled fund-specific performance;
  • More flexibility to report carved-out asset class performance; and
  • More options for advertising GIPS standards compliance.

Since they were introduced in 1999, the GIPS standards have steadily grown more popular. Though not mandated by regulation, over 1,700 organizations — including most of the world’s top investment managers — report that they adopt the best practices the standards set out. Many asset owners expect traditional managers they work with to adopt the standards, and are expressing interest in their alternative managers complying; a growing number of asset owners are also claiming compliance.


Follow WP on Facebook, LinkedIn and Twitter