GIPS:Learning Outcomes • Why GIPS created? • What parties the GIPS apply to and who is served? • Key Characteristics • Fundamental of Compliance • Construction of Composite • Firm Definition • presentation and reporting • GIPS vs. Local Regulations • Eight Major Sections of the GIPS • Verification 1 Why GIPS created? • GIPS is a set of ethical principles based on a standardized, industry‐wide approach. Investment firms can voluntarily follow GIPS in their presentation of historical investment results to prospective clients. GIPS seek to avoid misrepresentations of performance. Misleading practices included: • Representative accounts—showing a top‐performing portfolio as representative of firm’s results. • Survivorship bias—excluding "weak performance" accounts that have been terminated. • Varying time periods—showing performance for selected time periods with outstanding returns. 2 Who is affected? Who can claim compliance? • Investment Management Firms intend to serve existing and prospective clients. Who benefits from compliance? • Investment management firm‐‐‐‐‐‐Allow clients to compare investment performance among investment firms more easily and have more confidence. • Clients and prospective clients‐‐‐‐get more fairly and complete information. 3 Key Characteristics • To claim compliance, an investment management firm must define its “firm,” and this definition should reflect the “distinct business entity” that is h
