CFA Says Deadline For Convergence To Single Global Investment Performance Standard Nears

The CFA Centre for Financial Market Integrity is reminding all North American investment management firms to switch their AIMR PPS claims of compliance to the Global Investment Performance Standards (GIPS) when they present performance for periods after December 31, 2005.

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The CFA Centre for Financial Market Integrity is reminding all North American investment management firms to switch their AIMR-PPS claims of compliance to the Global Investment Performance Standards (GIPS) when they present performance for periods after December 31, 2005.

Similarly, consultant questionnaires and Requests for Proposals (RFPs) must be modified to only ask firms about their compliance with the GIPS standards.

“By choosing to comply with the GIPS standards, investment management firms are assuring prospective clients that their historical performance track record is complete and fairly represented,” said Alecia Licata, director of investment performance standards at the CFA Centre for Financial Market Integrity. “Pension funds, insurance companies, and individual investors know that transparency and comparability are important parts of an investment manager’s integrity.”

Introduced in 1999, the GIPS standards are universal, voluntary ethical standards used by investment management firms for calculating and presenting investment performance that ensures fair representation, full disclosure, and apples-to-apples comparisons. Today, firms in more than 25 countries have adopted the GIPS standards. Industry studies show that nearly 80 percent of U.S. investment firms and 65 percent of Canadian firms comply with the AIMR-PPS standards, the predecessor of the GIPS standards.

“The move to a single global standard began more than 10 years ago. Since that time, 23 regional organizations worked together with the CFA Centre to establish best practices from each local standard so that investment performance can be compared from one country to another,” said Licata.

To claim compliance with the GIPS standards, firms must ensure that all presentations that include performance results for periods after December 31, 2005 meet the requirements of the revised version of the GIPS standards. Performance presentations that include results only up to December 31, 2005 may be prepared in compliance with the previous version of the GIPS standards (and/or the AIMR-PPS standards). To facilitate the shift, AIMR-PPS compliant firms are granted reciprocity to claim compliance with the GIPS standards for periods prior to January 1, 2006.

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