GIPS® Advertising Guidelines for Firms

Firms claiming compliance with the 2020 edition of the Global Investment Performance Standards (GIPS®) have two options for communicating their claim of compliance. One of which is making a full claim of compliance in the firm’s GIPS report, formerly called a “GIPS compliant presentation.” However, asset managers may choose to follow the advertising guidelines to state compliance with the GIPS standards outside of a GIPS report.

The GIPS Advertising Guidelines are voluntary in that asset managers may choose not to publicize the claim of compliance outside of a GIPS report. When creating and publishing GIPS Advertisements, it is important to remember the GIPS Advertising Guidelines do not replace or negate the requirements of the GIPS standards, and all requirements should continue to be implemented. As such, using a GIPS Advertisement does not remove the requirement to distribute a GIPS report to all prospective clients when they become prospects and every 12 months that they remain prospects after the initial delivery.

If a firm has the requirement to always include a GIPS report in back of its marketing pitchbook, then the firm must include a reference to where the report is located; the 2020 edition of the GIPS standards recommends including this reference in the table of contents.

A summary of the specific requirements within the GIPS Advertising Guidelines, depending on the advertisement’s content, is listed below:

Disclosures for GIPS Advertisements that do not include performance

Asset managers must include the following disclosures when issuing GIPS Advertisements that do not mention performance information:

  • The GIPS Advertising Guidelines compliance statement: “[firm name] claims compliance with the Global Investment Performance Standards (GIPS®).”
  • “GIPS® is a registered trademark of CFA Institute. CFA Institute does not endorse or promote this organization, nor does it warrant the quality or accuracy of the content contained herein.”
  • Disclosure of how GIPS-compliant performance information for the firm’s strategies and products may be obtained

GIPS Advertising Guidelines for a Composite that includes performance

The following disclosures must be made on GIPS Advertisements for a Composite that includes performance:

  • The three disclosures listed above
  • Returns clearly labelled as gross and / or net
  • Benchmark returns for the same periods the composite is presented
  • Notice of the reporting currency
  • Disclosure when the GIPS Advertisement conforms with laws or regulations which conflict with the requirements or recommendations of the GIPS standards or the GIPS Advertising Guidelines
  • If money-weighted returns are presented, since-inception annualized returns through the most recent period end presented or the most recent year end

When presenting time-weighted returns for a composite, there are four options for advertising a series of returns:

  • One, three, and five year annualized returns as of the most recent period presented, or since-inception returns if less time than the required periods has elapsed;
  • Period to date returns, plus one, three, and five year annualized returns as of the most recent period presented, or since-inception returns if less time than the required periods has elapsed;
  • Period to date returns, plus five years of annual returns, or since-inception returns if less time than the required periods has elapsed; or
  • Annualized returns for the full period presented in the GIPS report through the most recent period end presented, or the most recent year end.

When presenting money-weighted returns for a composite, firms must present the annualized (for periods longer than one year) or non-annualized (for periods less than one year) composite since-inception money-weighted return through either the most recent period end, or the most recent annual period end.

There are five additional recommended disclosures which include:

  • Firm definition;
  • Composite description;
  • Benchmark description;
  • Why no benchmark is presented if the firm determines there is no appropriate benchmark; and
  • Use of leverage, derivatives, and short positions.

If your firm has questions about creating GIPS Advertisements or the implementation of the GIPS Advertising Guidelines, Fairview® Performance Service can help. We offer dynamic and ongoing verification services for firms claiming or seeking to claim compliance with the GIPS standards, including the GIPS Advertising Guidelines. Contact us today for more information about what we can do for your firm.

2020-08-31T10:56:00-05:00 August 30th, 2020|Articles, Flash Reports, GIPS®, News|