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Ambika D'Souza CIPM, PMP
Global Head of GIPS, SSGA
March 10, 2016
GIPS Workshop –PMA Conference
Geoffrey Hecht CIPM
Partner, Ashland Partners & Co. LLP
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Contents
The views expressed in this material are the views of Ambika D’Souza through the period ended March 12, 2016, and are subject to change.All material has been obtained from sources believed to be reliable. There is no representation or warranty as to the accuracy of the information and State Street shall have no liability for decisions based on such information.
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1. Introduction
What are the Global Investment Performance Standards (GIPS®)?
Why Create Performance Standards?
GIPS Governance Structure — a Global Reach
2. How to get ready to become GIPS compliant
Why GIPS®?
Pre Project Initiation Phase
Initiation & Planning Phase
Execution Phase
3. Understand the requirements for claiming compliance with the GIPS standards
A walkthrough of the GIPS handbook
A look at sample GIPS Compliant Presentations
GIPS & Marketing
Verifications vs. Performance Examinations
4. SEC & GIPS — Hot topics
5. GIPS Adoption – Trends & Updates
6. Q&A’s
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Introduction
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What are the Global Investment Performance Standards (GIPS®)?• Stands for “Global Investment Performance Standards”
– Evolved from the AIMR PPS– An ethical set of industry-accepted principles, administered by the CFA Institute – Define how investment managers should calculate and present performance with fair representation and full disclosure– GIPS standards consist of required provisions that must be followed to claim compliance; and recommended provisions that are
encouraged to achieve best practice– The claim of compliance is the at the defined GIPS Firm, and not at individual portfolio or composite levels
• Although self regulated, it is not uncommon for local market regulatory bodies to routinely review an organization's claim of GIPS compliance and supporting processes as part of an audit
• Firms cannot choose the GIPS provisions with which they will comply on an a la carte basis — it is all or nothing!
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Why Create Performance Standards?
• Stops cherry picking– Addressed by requiring all discretionary fee-paying, actual portfolios be in a composite
• Stops being selective about time periods– Annual returns required
• Use of model/simulated results– Not permitted
• Survivorship bias– Terminated accounts must remain
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GIPS Governance Structure — A Global Reach
Source: http://www.gipsstandards.org/about/governance
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GIPS Governance Structure — A Global Reach
Source: http://www.gipsstandards.org/about/governance
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How to Get GIPS Compliant
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Why GIPS?
Firm-wide ability to claim compliance offers a competitive advantage versus competitors, especially in regions of the world where it is less commonly utilized
Fair representation: Numbers can be trustedFull disclosure: Commitment to professional ethicsEnhanced internal control structure
Bottom line: Increased opportunities to sell products and generate revenue
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Pre Project Initiation Phase 10
Requirements versus Recommendations
1. Understand the essentials of GIPS Compliance
• Fundamentals of Compliance, Input Data, Calculation, Composite Construction, Disclosures, Presentation & Reporting
• Tap multitude of resources available e.g. CFA Institute, GIPS website (www.GIPSStandards.org), industry contacts
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Pre Project Initiation Phase 11
2. Undertake a gap analysis — the devil is in the detail
• Record retention• Input data requirements • System capabilities (can it scale?)• Documentation of Procedures & Policy• Marketing collateral distribution tracking (vis-à-vis Error Correction Policy)• Staffing
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Pre Project Initiation Phase 12
3. Estimate funding• Gap analysis should yield numbers• Include a sizable contingency reserve
4. Get buy-in & commitment• Identify & engage all stakeholders• Set up Working and/or Steering Committees
5. Enlist a project sponsor• High level sponsor to ensure active engagement of stakeholders
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Initiation and Planning Phase 13
1. Obtain project dollars
2. Establish scope
3. Establish timelines and milestones
4. Establish a communication plan
5. Identify potential risks
6. Onboard resources
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Execution Phase 14
1. GIPS Provisions
a. GIPS Firm definition– Dictates the universe of assets/portfolios to be supported– Guidance Statement on Definition of Firm available
b. Non-discretionary definition– Ability of the firm to implement its intended strategy– Must apply consistently– Not in Firm’s composite BUT in Firm AUM– Guidance Statement on Composite Definition available
c. Develop Policies & Procedures documentation– Basic principles used to guide decisions and actions (policies)
• Tackle one provision at a time
• Error Correction Policy– Actions required to implement a policy (procedures)
• Controls in processes
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Execution Phase contd. 15
2. System capabilities– Cost versus benefit– Fully integrated solution or a simple spreadsheet– Buy versus build versus a combination– Requirements versus gaps– Close partnering with Technology group– Workarounds needed for day 1 Go Live
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Execution Phase contd. 16
3. Ongoing Maintenancea. Set-up infrastructure– System– Personnel– Training
b. Construct composites– All actual fee-paying discretionary portfolios in a composite– Create GIPS® Compliant Presentations
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Execution Phase contd. 17
4. Undertake mini-verification
• “Verification is a process by which a verifier assesses whether the firm has complied with all the composite
construction requirements of the GIPS standards on a firm-wide basis, and the firm’s policies and procedures
are designed to calculate and present performance in compliance with the GIPS standards”
• Guidance Statement available
• Some verifiers will share their verification model
• Undertaken by internal or external personnel
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Summary Take-aways 18
Do not underestimate scope or timeTreat it as a project (sponsor & stakeholder identification critical)Engage stakeholders before, during and afterProvide continuous education
Maintaining compliance with GIPS should be owned and understood by the whole organization, not just performance personnel.
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Understanding the Requirements
A walkthrough of the GIPS handbookA look at sample GIPS Compliant Presentations GIPS & MarketingVerifications vs. Performance Examinations
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GIPS Handbook
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The GIPS Standards
Provisions of the GIPS Standards GIPS Valuation Principles GIPS Advertising Guidelines Verification GIPS Glossary
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Provisions of the GIPS Standards Fundamentals of Compliance Input Data Calculation Methodology Composite Construction Disclosure Presentation and Reporting Real Estate Private Equity Wrap Fee/Separately Managed Account (SMA)
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Fundamentals of Compliance The GIPS standards must be applied on a firm-wide
basis. If the firm does not meet all the requirements of the
GIPS Standards, the firm must not represent or state that it is in compliance with GIPS.
Statements referring to the calculation methodology as being “in accordance,” “in compliance,” or “consistent” with the Global Investment Performance Standards, or similar statements, are prohibited.
Firms must make every reasonable effort to provide a compliant presentation to all prospective clients. Firms must not choose to whom they present a compliant presentation. As long as a prospective client has received a compliant presentation within the previous 12 months, the firm has met this requirement.
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Input Data All data and information necessary to support all items
included in a compliant presentation must be captured and maintained.
For periods beginning on or after 1 January 2011, portfolios must be valued in accordance with the definition of fair value and the GIPS Valuation Principles.
For periods beginning on or after 1 January 2010, portfolios must be valued on the date of all large cash flows.
Accrual accounting must be used for fixed-income securities and all other investments that earn interest income.
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Calculation Methodology Total returns must be used. For periods beginning on or after 1 January 2005, firms
must calculate portfolio returns that adjust for daily-weighted external cash flows.
All returns must be calculated after the deduction of the actual trading expenses incurred during the period. Firms must not use estimated trading expenses.
Composite returns must be calculated by asset-weighting the individual portfolio returns using beginning-of-period values or a method that reflects both beginning-of-period values and external cash flows.
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Composite Construction All actual, fee-paying, discretionary portfolios must be included in at
least one composite. Composites must be defined according to investment mandate,
objective, or strategy. Composites must include new portfolios on a timely and consistent
basis after each portfolio comes under management. Terminated portfolios must be included in the historical performance of the composite up to the last full measurement period that each portfolio was under management.
Portfolios must not be switched from one composite to another unless documented changes to a portfolio’s investment mandate, objective, or strategy or the redefinition of the composite makes it appropriate.
Carve-outs, Minimum asset levels, Significant Cash Flows, etc.
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Disclosure Compliance Statement Firm definition Composite Description Composite create date If model or actual investment management fees are used Currency used to express performance Fee schedule If applicable, leverage/derivatives/short positions,
minimum asset level, withholding tax, bundled fees, sub-advisor, significant cash flow, redefinitions, portability
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Presentation and Reporting At least five years of performance building up to a
minimum of 10 years of GIPS-compliant performance. The total return for the benchmark for each annual
period. The number of portfolios in the composite as of each
annual period end. Composite assets as of each annual period end. Either total firm assets or composite assets as a
percentage of total firm assets, as of each annual period end.
A measure of internal dispersion for each annual period. Beginning 1 January 2011, the three-year annualized ex-
post standard deviation (using monthly returns) of both the composite and the benchmark. 28
Real Estate Publicly traded real estate securities, Commercial mortgage-backed
securities and Private debt investments where the expected return is solely related to contractual interest rates without any participation in the economic performance of the underlying real estate are not considered real estate.
For periods beginning on or after 1 January 2008, real estate investments must be valued at least quarterly.
For periods beginning on or after 1 January 2012, real estate investments must have an external valuation at least once every 12 months unless client agreements stipulate otherwise.
Additional requirements for real estate closed-end fund composites: annualized since inception internal rates of return; composites must be defined by vintage year and investment mandate, objective, or strategy.
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Private Equity Provisions apply to fixed life, fixed commitment vehicles
(primary funds, secondary funds, funds of funds). Do not apply to open-end and Evergreen funds.
Private equity investments must be valued at least annually.
Firms must calculate annualized since inception internal rates of return (SI-IRR).
Primary funds must be included in at least one composite defined by vintage year and investment mandate, objective, or strategy.
Funds of funds must be included in at least one composite defined by vintage year of the fund of funds and/or investment mandate, objective, or strategy.
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Wrap Fee/Separately Managed Account (SMA)
Provisions apply to all Wrap Fee/SMA portfolios where there are bundled fees and the Wrap Fee/SMA sponsor serves as an intermediary between the firm and the end user of the investment services.
For all Wrap Fee/SMA compliant presentations that include periods prior to the inclusion of an actual Wrap Fee/SMA portfolio in the composite, the firm must disclose, for each period presented, that the composite does not contain actual Wrap Fee/SMA portfolios.
When firms present performance to a Wrap Fee/SMA prospective client, the composite presented must include the performance of all actual Wrap Fee/SMA portfolios.
When firms present performance to a Wrap Fee/SMA prospective client, performance must be presented net of the entire wrap fee. 31
GIPS Valuation Principles
Fair Value Definition Valuation Requirements Valuation Recommendations
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Fair Valuation Definition
The amount at which an investment could be exchanged in a current arm’s length transaction between willing parties in which the parties each act knowledgeably and prudently.
Must be determined using the objective, observable, unadjusted quoted market price for an identical investment in an active market on the measurement date, if available.
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Valuation Requirements
For periods beginning on or after 1 January 2011, portfolios must be valued in accordance with the definition of fair value and the GIPS Valuation Principles.
Firms must value investments using objective, observable, unadjusted quoted market prices for identical investments in active markets on the measurement date, if available.
For periods beginning on or after 1 January 2011, firms must disclose if the composite’s valuation hierarchy materially differs from the recommended hierarchy in the GIPS Valuation Principles.
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Valuation Recommendations
Valuation Hierarchy: firms should incorporate the following hierarchy into the policies and procedures for determining fair value for portfolio investments on a composite-specific basis. Investments must be valued using objective,
observable, unadjusted quoted market prices for identical investments in active markets on the measurement date, if available.
Objective, observable quoted market prices for similar investments in active markets.
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Valuation Recommendations
Quoted prices for identical or similar investments in markets that are not active (markets in which there are few transactions for the investment, the prices are not current, or price quotations vary substantially over time and/or between market makers).
Market-based inputs, other than quoted prices, that are observable for the investment.
Subjective unobservable inputs for the investment where markets are not active at the measurement date. Unobservable inputs should only be used to measure fair value to the extent that observable inputs and prices are not available or appropriate.
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GIPS® Compliant Presentations
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Key Concept: Full Disclosure A fully compliant presentation includes: Claim of Compliance Annual statistics:
o Composite and Benchmark performance o Internal dispersion and three-year
annualized ex-post standard deviation o Number of accounts o Firm and Composite AUM o If applicable, % bundled fee, % carve-out,
% non-fee-paying Firm and composite disclosures
o Firm definition o Composite description o Composite creation date o GIPS disclaimers
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One-on-One Presentations
Materials offered to a PROSPECTIVE CLIENT through a communication or presentation that is of a private and confidential nature and that is not made to the public through any print, electronic or other medium
Made in a setting that provides prospects the opportunity to discuss with the advisor the types of fees that might be paid
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RFPs and Consultant Databases
Considered to be a PROSPECTIVE CLIENT
All should receive a full disclosure presentation
The burden on the compliant firm is to send the disclosure, beyond that is out of the manager’s control
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Fact Sheets, Updates, Newsletters
What is shown on the piece? o Composite Performance o Claim of Compliance o Just industry or firm information?
If the piece could be considered a solicitation and the prospective client definition is met, a fully compliant presentation is required
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What Can Also Be Included?
Any page that performance is shown we recommend that you: Clearly label whether performance is Gross
or Net Identify whether performance includes the
reinvestment of income Add the disclosure, “Past Performance is
Not Necessarily Indicative of Future Results”
*Any page where performance is shown that does not include the full presentation you must refer to where the disclosures can be found.
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What Should Not be Included?
As long as the information is not misleading, you have quite a bit of latitude on what you can include in your Pitch Book or One-on-One Presentation. A sample of Don’ts:
Model, hypothetical, back tested, or simulated results linked to actual performance results
Non-portable performance from a prior firm linked to current ongoing performance results
Comparing performance to an inappropriate benchmark
Selectively presenting (i.e., cherry-picking) performance periods
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Prohibited Statements
Statements referring to the calculation methodology as being “in accordance,” “in compliance,” or “consistent” with GIPS®, or similar statements, are prohibited
Statements referring to the performance of a single, existing client portfolio as being “calculated in accordance with GIPS®” are prohibited, except when reporting the performance of an individual client’s portfolio to that client 44
Customized Requests
PROSPECTIVE CLIENTS may request reports after a one-on-one presentation
Permitted to create reports based on the request
Document and store all customized requests
MUST ensure the prospect has received a compliant presentation
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Customized Requests
PROSPECTIVE CLIENT customized request for specific items to be shown in the presentation: Benchmark Carve-out Customized Strategy
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GIPS® & Marketing
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Agenda
GIPS® & Firm Responsibility Recordkeeping Requirements Prospective Clients Error Correction Policy Annual Disclosure Presentation One-on-One Presentations Advertisements Supplemental Information
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Firm Responsibilities
Firms must make every reasonable effort to provide a compliant presentation to all PROSPECTIVE CLIENTS (within previous 12 months)
Firms must not choose to whom they present a compliant presentation
If the advisor claiming compliance with GIPS® readily knows the recipient of performance information (i.e., a one-on-one presentation), then a fully compliant disclosure presentation must be provided
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Recordkeeping Requirements
The GIPS standards state, “All data and information necessary to support all items included in a compliant presentation must be captured and maintained” Record or log kept of all presentations Keep an updated list of prospective clients and when they
received the fully compliant presentation Best practice: one common, compliance approved,
presentation is presented
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Key Concept: Prospective Client
Any person or entity that has expressed interest in one of the FIRM’s COMPOSITE strategies and qualifies to invest in the COMPOSITE
Existing clients may also qualify as PROSPECTIVE CLIENTS for any strategy that is different from their current investment strategy
Investment consultants and other third parties are included as PROSPECTIVE CLIENTS if they represent investors that qualify as PROSPECTIVE CLIENTS
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Error Correction Policy
Written Error Correction policies and procedures must be in place January 1, 2010
Guidance Statement requirements only address errors related to GIPS annual disclosure presentation
Must implement the P&P consistently as well as define materiality in the EC process
For material errors: o Error must be corrected and disclosed in presentation for 12
months o Corrected presentation must be distributed to all existing
clients that received the erroneous presentation o Every reasonable effort must be made to distribute to
prospects and other parties that received the erroneous presentation
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Definition of an Advertisement
Any written material other than one-on-one presentations and individual client reporting, distributed to maintain existing clients or solicit new clients for a FIRM is considered an advertisement
Includes any materials that are distributed to or designed for use in newspapers, magazines, FIRM brochures, letters, media, websites or other material addressed to more than one PROSPECTIVE CLIENT
Optional: GIPS Advertising Guidelines 53
GIPS® Advertising Guidelines
Advertising Guidelines do not replace the GIPS ® standards
Allow a GIPS ® compliant firm to state that it is compliant with GIPS ® in something other than a fully compliant presentation
Different set of requirements if performance is shown or not
You can always choose to include a fully compliant presentation in an advertisement
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Sample Advertisement Presentation
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Rules of Thumb
If you are unsure of your audience/circumstance, assume the presentation is an advertisement (i.e. net performance must be included, etc.)
If claiming GIPS compliance, when in doubt always include the fully compliant disclosures
If still unsure ask Ashland Partners
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Under the Microscope
Marketing and Performance Presentations Ensure all materials have been reviewed by compliance
and approved o Strong internal controls in place to prevent easy alteration of
materials
Increased SEC scrutiny resulting in fines and bans? CFAI inquiries and potential disciplinary proceedings? More investors and entities are requiring and
encouraging GIPS compliance for managers
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Supplemental Information
Performance-related information included as part of a compliant presentation that supplements or enhances the required and/or recommended provisions of the GIPS standards.
Must be clearly labeled and identified as supplemental to a particular compliant presentation.
Examples include: model, hypothetical, back tested, or simulated returns (not
linked), composite or portfolio-level specific holdings, portfolio-level sector weightings
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Verifications vs. Examinations
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Verification Is
Independent third-party review of an investment management firm’s performance measurement processes and procedures. Establishes that a firm claiming compliance with the GIPS standards has adhered to the Standards on a firm-wide basis. Verification brings credibility to the firm’s claim of compliance.
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Verification Is Not
Verification does not ensure the accuracy of any specific composite presentation Verification is not an audit Verification is not the review of a single composite, but is a review of an entire firm Verification does not focus solely on performance
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Performance Examination
Detailed testing of a specific composite and its associated compliant presentation Tests for a specific composite
1. Whether the firm has constructed the composite and calculated the composite performance in compliance with the GIPS Standards
2. Whether the firm has prepared and presented the composite presentation in compliance with the GIPS Standards.
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Performance Examination
Firms can only receive a performance examination if they have also received a firm-wide verification for the same time period. Firms cannot state a particular composite has been GIPS Verified.
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Initial Verification
Preliminary Requests
Performance files List of all new and terminated accounts, firm-wide, for the period under review List of Non-Discretionary accounts for period under review The Policies & Procedure document Annual measures of dispersion for the composites Annual benchmark returns for the composites If applicable, a copy of the last regulatory deficiency letter received and the firm’s response Copies of the most recent regulatory filings showing assets under management at each year-end under review (Form ADV Part I), and most recent Form ADV Part II. List of assets under management at each year-end, by account and composite.
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Initial Verification The following are the steps for an initial verification, which typically takes 6-8 weeks.
Step 1: Ashland Partners will send the client an initial data request which will consist of items listed in the Preliminary Request. Step 2: In conjunction with the information provided by the client, the verification analysis begins. The process is generally performed electronically at Ashland Partners’ offices, under the direction of the assigned engagement staff Step 3: The next stage of the verification process represents Ashland Partners’ testing. You will receive a detailed documentation request list, inclusive of all the information we will expect to review. Step 4: Once all documents have been received and the testing has concluded, the verification carries on to our internal review process where it passes through a list of checks and balances. Step 5: Once the verification passes through our internal review process, final verification reports are issued. Once the initial verification is complete, the process will repeat itself in a much shorter time frame as we begin the next full quarterly verification.
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Ongoing Verification
For a sample of both composites and accounts, to be determined by Ashland Partners, we will request:
Periodic market values and returns for each portfolio within the composites tested. Monthly, quarterly, and annual composite returns. List of all new, closed, and changed accounts to the firm. Additional GIPS composite statistics. Client contracts and investment guidelines Termination letters Custody statements Fee invoices
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Ongoing Verification – What We Test
Documentation Review Firms are required to maintain Books and Records to Support the performance track record for all periods. Throughout our consultation, we will assesses viability of books and records and provide any guidance where applicable
Current marketing materials (one-on-one, advertisements, newsletters) as well as a sample of recent RFPs and GIPS disclosure presentations. Tests to ensure that all applicable accounts have been considered in developing the composites Tracing of selected asset listings to custodial statements. 67
Tests of a selected number of portfolio security purchases and sales, income and expense transactions, and account contributions and withdrawals. Re-computation of performance results for selected accounts. Agreement of performance for selected accounts to the respective composite. Tests of the computation of the composites in accordance with the prescribed methodology, including market weighting of composite returns. Tests of selected net of fee calculations, if applicable. Tests of benchmark results and other financial information to be included in the verification reports.
Ongoing Verification – What We Test
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Internal Review Process
As a CPA firm, we are required by the AICPA to have an internal review process in place. First, individuals who weren't involved in the project review the work to ensure we have dotted all our i's and crossed all our t's. And then a partner will conduct their review and sign off on the project prior to delivery. This process typically takes about 5 business days, during which any items needing clarification will be immediately communicated to you.
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Verification Frequency
Quarterly Semi-Annual Annual
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SEC & GIPS — Hot Topics
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SEC & GIPS – Net of FeesThe Advisers Act generally defines an advertisement (Rule 206(4)-1(b)) as any communication addressed to more than one person that offers any investment advisory service with regard to securities.
GIPS gross of fees recommendation (Provision 5.B.1) vs. Registered Investment Advisers (RIA) must present net-of-fee if they choose to advertise performance
SEC staff letter issued to Clover Capital Management, Inc. (October 28, 1986) (“Clover”) prohibits an advertisement that, among other things - shows performance that does not reflect the deduction of advisory fees, and other expenses (net-of-fees)
When presenting net-of-fees results using a model fee instead of actual fees, GIPS requires the disclosure of whether model or actual investment management fees were used in the presentation (Provision 4.A.6). Model fee used must be the highest fee charged to any account employing the strategy. The JPMIM no-
action letter (May 7, 1996) stated that it “would not recommend enforcement action if JPMIM advertises the composite performance of accounts for which it employs a particular investment strategy by deducting a model fee equal to the highest fee charged to any account employing that strategy during the performance period.”
SEC staff letter issued to Association for Investment Management and Research (December 18, 1996) (“AIMR”) - Gross of fee performance may be shown in an advertisement if shown in equal prominence with net of fee performance
SEC staff letter issued to Investment Company Institute (September 23, 1988) (“ICI”) - Gross of fee only performance may be shown to a wealthy prospective client/investor, in a one-on-one presentation, with certain required disclosures
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SEC & GIPS - Simulated/Hypothetical Performance
Recent Mackenson and Lucia actions September 2015 and Alpha Fiduciary November 2015 action cases Inadequate testing, Inadequate records retention, and Inadequate disclosures
Must clearly state where back-tested v. actual Must not also be false or misleading
The GIPS Guidance Statement on the Use of Supplemental Information states that model, hypothetical, back-tested, or simulated returns may be presented as “supplemental information” but must not be linked to actual returns.
Carefully consider the requirements outlined in the Clover no-action letter as well as other administrative proceedings for proper disclosures, including (but not limited to): Material changes to the hypothetical portfolio Unusual market conditions during the time period portrayed Impact of significant securities in the portfolio unrelated to the investment strategy Clients following the model portfolio with materially different results
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SEC & GIPS - Recordkeeping
The GIPS Guidance Statement on Recordkeeping Requirements requires that all records deemed necessary by the firm must be maintained for each year that is presented in a compliant presentation.
The Advisers Act is more descriptive in this area and requires that records be maintained and preserved in an easily accessible place for at least five years (the first two years in an appropriate office of the adviser) from the end of the fiscal year during which the adviser last published or disseminated the communication.
Underlying data destroyed GIPS - If the underlying data was destroyed because of “a catastrophic event” beyond the control of the
manager and unavailable from other sources, the GIPS Guidance Statement on Recordkeeping Requirements states that the firm may continue to claim compliance and show performance if the lack of records for the unavailable period(s) is disclosed. The disclosure must include the reason why the records are unavailable and state that the firm is unable to duplicate the records.
The Advisers Act does not allow firms to present unsubstantiated performance results. Also, in a no-action letter to Jennison, “the SEC responded that they do not, as a matter of policy, provide no-action assurances regarding whether a particular advisers’ records are sufficient to form the basis of, or demonstrate calculation of the investment advisers’ investment performance under Rule 204-2(a)(16). They did state however that the adviser can help facilitate an SEC examination by making third party reports available and reports prepared by an independent verifier on such performance.”
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SEC & GIPS – Sub-advisors
Provision 4.A.25. of the GIPS standards states that “for periods beginning on or after 1 January 2006, firms must disclose the use of a sub-advisor and the periods a sub-advisor was used.”
Administrative and Cease-and-Desist proceeding against Virtus Investment Advisers, Inc. for making misstatements on the performance of accounts managed by its sub-advisor F-Squared Investments Inc..
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GIPS Adoption – Trends & Updates
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GIPS® Adoption Trends & Updates
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GIPS® Adoption Trends
2015 CFA Registration Requirement ~1572 compliant firms 85% are verified
Standards are evolving to meet needs Asset Owners Alternative Managers Fund Managers
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GIPS® - Under Discussion Portability Guidance Statement What is ‘Portability’? Clarifying requirements re: 12 month rule Relaxing the obligation to port
Supplemental Information Guidance Statement Restricted to compliant presentations
Overlay Guidance Statement Treatment for inclusion in composite and firm
assets
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GIPS® - Under Discussion Benchmark Guidance Statement Non-traditional investment strategies Widely recognized benchmarks
Expanded Use of IRRs All vehicles with a capital call structure
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GIPS® - Recent Guidance
Broadly Distributed Pooled Vehicle Guidance Statement Exposure draft released end of Jan 2016;
Comment period through end of April; Guidance effective 1/1/17 Guidance applies to firms that manage funds and
create their documents and fund-specific marketing Guidance does not apply to composites that
include a fund(s) Hedge Funds, Real Estate and Private Equity are
not subject to this guidance 81
GIPS® - Recent Guidance
Pooled Vehicle Guidance Statement – Requirements Description of fund strategy Indication of risk Calculation methodology and
time periods Corresponding benchmark total returns and description Currency used to express performance
No requirement or recommendation to provide a compliant presentation
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GIPS® - Recent Guidance
Pooled Vehicle Guidance Statement – Recommendations Disclose whether the fund has sales charges/loads
and whether performance is reduced by them Specific claim of compliance: GIPS Pooled Fund Claim of Compliance:
"XYZ, the firm managing this pooled fund, claims compliance with the Global Investment Performance Standards (GIPS). For more information on the GIPS Standards, please visit www.gipsstandards.org."
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Questions?
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Biography
Ambika D’Souza
Ambika D’Souza is Vice President and Global Head of GIPS at State Street Global Advisors, Boston. Her group is responsible for ensuring GIPS® compliance globally and implementing the one Global GIPS "firm". Previously, she was responsible for the global implementation of a new performance system.
Prior to joining SSGA, Ambika was Analytics Manager for the public assets of the Lucent Technologies retirement plans. Before that, she was the Head of Performance at WestLB Asset Management in London. Ambika brings over 19 years of performance and analytics experience to the group.
Ambika holds a BEng. Honors in Mechanical Engineering from Imperial College, University of London, and an MSc in Operational Research from the Warwick Business School, University of Warwick, UK. She has earned a certificate in Applied Project Management from Boston University, is a certified Project Management Professional (PMP), and is CIPM (Certificate in Investment Performance Measurement) certified. She is also involved in various industry associations including membership of the GIPS® Investment Manager Subcommittee (administered by the CFA Institute), the GIPS® Pooled Funds Advisory Team, and CIPM Standards Setting.
Contact Information
Ambika D’Souza CIPM, PMP Vice President, Global Head of GIPS®
State Street Global Advisors Tel: +1 617 664-0798 [email protected] www.ssga.com
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Geoffrey Hecht, CIPM Partner, Ashland Partners & Co. LLP Geoffrey is a Partner with Ashland Partners, an investment-specialist CPA firm, providing audit and consulting services to hedge funds, private equity and real estate firms, investment companies, and insurance companies. He manages approximately 70 client relationships, focusing on verifying investment advisors’ claim of GIPS® compliance as well as other performance attestation engagements. Prior to joining Ashland Partners, Geoffrey was a Portfolio Analyst in the Performance Measurement Group of Fiduciary Trust Company International where he was responsible for institutional account performance and analytics. Currently, Geoffrey is located in Ashland’s New York office and his client base includes firms in Europe, North America, South America, Africa and the Caribbean, which has given him the opportunity to work with a diverse set of investment managers. Geoffrey has earned a Certificate in Investment Performance Measurement (CIPM) from the CFA Institute.
Our Speaker
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Questions?/ Answers!
Locations
Jacksonville, OR
Denver
Chicago
Boston
Jersey City
Shanghai
Tokyo
Seoul
www.ashlandpartners.com
Geoffrey Hecht, CIPM Partner, Ashland Partners & Co. LLP Direct: 917-639-3905 Ext. 4035 E-mail: [email protected]
The Verifier Blog:
https://ashlandpartnersblog.wordpress.com/
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State Street Global Advisors
Australia: State Street Global Advisors, Australia, Limited (ABN 42 003 914 225) is the holder of an Australian Financial Services Licence (AFSL Number 238276). Registered office: Level 17, 420 George Street, Sydney, NSW 2000, Australia Telephone: 612 9240‐7600 ?? Facsimile: 612 9240‐7611
Belgium: State Street Global Advisors Belgium, Chaussée de La Hulpe 120, 1000 Brussels, Belgium. Telephone: 32 2 663 2036, Facsimile: 32 2 672 2077. SSGA Belgium is a branch office of State Street Global Advisors Limited. State Street Global Advisors Limited is authorised and regulated by the Financial Conduct Authority in the United Kingdom.
Canada: State Street Global Advisors, Ltd., 770 Sherbrooke Street West,Suite 1200 Montreal, Quebec; H3A 1G130 Adelaide Street East Suite 500, Toronto, Ontario M5C 3G6.
Dubai: State Street Bank and Trust Company (Representative Office), Boulevard Plaza 1, 17th Floor, Office 1703 Near Dubai Mall & Burj Khalifa, P.O Box 26838, Dubai, United Arab Emirates. Telephone: 971 (0)4‐4372800, Facsimile: 971 (0)4‐4372818.
France: State Street Global Advisors France. Authorised and regulated by the Autorité des Marchés Financiers. Registered with the Register of Commerce and Companies of Nanterre under the number 412 052 680. Registered office: Immeuble Défense Plaza, 23‐25 rue Delariviére‐Lefoullon, 92064 Paris La Défense Cedex, France. Telephone: ( 33) 1 44 45 40 00. Facsimile: ( 33) 1 44 45 41 92.
Germany: State Street Global Advisors GmbH, Brienner Strasse 59, D‐80333 Munich. Telephone 49 (0)89‐55878‐400. Facsimile 49 (0)89‐55878‐440.
Hong Kong: State Street Global Advisors Asia Limited, 68/F, Two International Finance Centre, 8 Finance Street, Central, Hong Kong, Telephone: 852 2103‐0288, Facsimile: 852 2103‐0200
Japan: State Street Global Advisors, Japan, 9‐7‐1 Akasaka, Minato‐ku, Tokyo Telephone 813‐4530‐7380 Financial Instruments Business Operator, Kanto Local Financial Bureau (Kinsho #345) Japan Securities Investment Advisers Association, Investment Trust Association, Japan Securities Dealers' Association
Ireland: State Street Global Advisors Ireland Limited is regulated by the Central Bank of Ireland. Incorporated and registered in Ireland at Two Park Place, Upper Hatch Street, Dublin 2. Registered number 145221. Member of the Irish Association of Investment Managers.
Italy: State Street Global Advisors Limited, Milan Branch (Sede Secondaria di Milano) is a branch of State Street Global Advisors Limited, a company registered in the UK, authorised and regulated by the Financial Conduct Authority (FCA ), with a capital of GBP 71'650'000.00, and whose registered office is at 20 Churchill Place, London E14 5HJ. State Street Global Advisors Limited, Milan Branch (Sede Secondaria di Milano), is registered in Italy with company number 06353340968 ‐ R.E.A. 1887090 and VAT number 06353340968 and whose office is at Via dei Bossi, 4 ‐ 20121 Milano, Italy ? Telephone: 39 02 32066 100 ? Facsimile: 39 02 32066 155.
Netherlands: State Street Global Advisors Netherlands, Adam Smith Building, Thomas Malthusstraat 1‐3, 1066 JR Amsterdam, Netherlands. Telephone: 31 20 7181701. SSGA Netherlands is a branch office of State Street Global Advisors Limited. State Street Global Advisors Limited is authorised and regulated by the Financial Conduct Authority in the United Kingdom
Singapore: State Street Global Advisors Singapore Limited, 168, Robinson Road, #33‐01 Capital Tower, Singapore 068912 (Company Reg. No: 200002719D), Telephone: 65 6826‐7500, Facsimile: 65 6826‐7501
Switzerland: State Street Global Advisors AG, Beethovenstr. 19, CH‐8027 Zurich. Telephone 41 (0)44 245 70 00. Facsimile Fax: 41 (0)44 245 70 16.
United Kingdom: State Street Global Advisors Limited. Authorised and regulated by the Financial Conduct Authority. Registered in England. Registered No. 2509928. VAT No. 5776591 81. Registered office: 20 Churchill Place, Canary Wharf, London, E14 5HJ. Telephone: 020 3395 6000. Facsimile: 020 3395 6350.United States: State Street Global Advisors, One Lincoln Street, Boston, MA 02111‐2900
Web: www.ssga.com
© 2016 State Street Corporation —All Rights Reserved
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Appendices
Important LinksGIPS Compliant Presentations samplesSEC & GIPS
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