Everything You Need To Know About GIPS 2020

ValueWalk’s Q&A session with Mark Goodey, the Director and Head of Investment Analytics at BNY Mellon’s Eagle Investment Systems. In this interview, Mark discusses his background and what his company does, Global Investment Performance Standards (GIPS), the impact on asset management if GIPS were non-existent, the impact of GIPS on different asset class valuations, the release of GIPS 2020, and if hedge funds are allowed to advertise.

global investment performance standards

mohamed_hassan / Pixabay

Can you tell us about your background?

I am the Director and Head of Investment Analytics. This role led the Eagle Performance product strategy of today and the path towards tomorrow. Another key facet is to provide thought leadership and be an evangelist for Eagle’s products and services.

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When did you start at your firm and what does it do?

After leading investment performance and market risk teams for over 20 years, I joined Eagle in early 2018. Eagle Investment Systems, a BNY Mellon company, is committed to helping financial institutions worldwide grow assets efficiently with its innovative portfolio management suite of data management, investment accounting and performance measurement solutions that are delivered over its secure private cloud, Eagle ACCESSSM. Eagle deploys trusted solutions and services that create operational efficiencies and help reduce complexity and risk. In addition to the cloud solutions, Eagle’s Managed ServicesSM offering helps deliver enriched and ready for use investment data. Eagle Investment Systems' integrated technology, products and services help our clients to grow their assets efficiently and effectively.

What are GIPS standards and what is happening to them?

The CFA Institute Global Investment Performance Standards (GIPS®) are globally accepted standards considered industry best practice for investment performance reporting and presentation. Adopted by hundreds of organizations around the world, the GIPS standards have been implemented by most of the top asset management firms.

By establishing requirements for consistent and transparent reporting, the GIPS standards empower investors to compare the past performance of asset managers. As investor demand drives product innovation, the Global Investment Performance Standards (GIPS®) are evolving to ensure practical, investment industry relevance while maintaining their core purpose: ensuring performance transparency and comparability.

How does GIPS differ from a country-specific fiduciary standard?

GIPS is an ethical self-regulated best practice adopted by almost 50 countries around the world. They are globally accepted standards considered industry best practice for investment performance reporting and presentation. Amongst other stated intent this helps to engender trust and transparency when representing investment performance.

What would the biggest impact be on asset management if GIPS were not in existence?

GIPS has established a culture of transparency for investment firms and asset owners through voluntary adoption. This has been good for the investment community, and more importantly, given credibility and engendered better trust in published investment performance returns claims.

Would this have any impact on non-U.S. managers?

GIPS is a global best practice standard formally supported in almost 50 countries around the world. So, yes.

How will GIPS changes impact valuations for illiquid investment like private equity or real estate?

There are now specific provisions in GIPS 2020 for these asset classes.

Will this be a boon for back office and service providers?

GIPS is already widely adopted across the world. As more and more companies and countries adopt the standards, we would hope that better controls, greater synergies and greater economies of scales can be seen. I would see it as a pre-requisite that both back offices and service providers offer appropriate services at an appropriate level of cost.

Does the SEC play any role here?

Any organization that makes a claim of GIPS compliance in the USA comes under the sphere of influence of the SEC.

Some potential quick fixes for compliance – what are some suggestions you have?

Eagle employs a rules-based software solution with easy navigation using our continuum of servicing capabilities; deployed, hosted or as a managed service. This gives our clients the best possible choice of options for success. We have combined with the world’s leading provider of GIPS verification services to offer a suite of systematized reports to make the process and claim of compliance even easier.

What are GIPS Advertising Guidelines?

These guidelines cover both firms and asset owners and provide options for advertising when mentioning the firm’s or asset owner’s claim of compliance. The GIPS Advertising Guidelines do not replace the GIPS standards, nor do they absolve firms and asset owners from presenting GIPS composite reports, GIPS pooled fund reports, and GIPS asset owner reports as required by the GIPS standards.

The guidelines themselves resonate with GIPS 2010 – consistent with what is presented in the appropriate Composite, Pooled Fund or Asset Owner report, and different requirements if publishing the advertisement with or without performance. The guidelines only apply to firms or asset owners that already comply with the GIPS Standards [13.A.1]. Returns and disclosures must be consistent with the relevant Composite, Pooled Fund or Asset Owner Report [13.A.5 through to 13.A.10]. When an advertisement does not include performance, the GIPS Advertising Guidelines compliance statement must be disclosed [13.B.1] and how to obtain GIPS-compliant performance information for the firm’s or asset owner’s strategies and products [13.B.2].

Are hedge funds allowed to advertise?

Yes, GIPS 2020 has tailored provisions for all investment firms, including hedge funds, private equity, and other alternative investments.

Final thoughts?

Eagle applauds the release of GIPS 2020 as it aims to broaden the appeal and participation. Adopting GIPS helps to enable and ensure the reporting of investment performance engendering transparency and comparability.




About the Author

Jacob Wolinsky
Jacob Wolinsky is the founder of ValueWalk.com, a popular value investing and hedge fund focused investment website. Prior to ValueWalk, Jacob was VP of Business Development at SumZero. Prior to SumZero, Jacob worked as an equity analyst first at a micro-cap focused private equity firm, followed by a stint at a smid cap focused research shop. Jacob lives with his wife and four kids in Passaic NJ. - Email: jacob(at)valuewalk.com - Twitter username: JacobWolinsky - Full Disclosure: I do not purchase any equities anymore to avoid even the appearance of a conflict of interest and because at times I may receive grey areas of insider information. I have a few existing holdings from years ago, but I have sold off most of the equities and now only purchase mutual funds and some ETFs. I also own a few grams of Gold and Silver