Global Investment Performance Standards (Gips) have long been established in the US, and are al...
Global Investment Performance Standards (Gips) have long been established in the US, and are already widely adopted in Continental Europe, but their acceptance by investment managers in the UK has been progressing at a more considered pace.
Devised and promoted by the respected Association for Investment Management and Research, Gips aim to offer investors a global standard for the calculation and presentation of performance data, allowing them to make comparisons wherever a fund is based. In an increasingly globalised industry, and in the post-Enron era where transparency and consistency are vital, the standard has attracted strong interest.
Compliance is still voluntary, but it is a prolonged and costly business. At the moment, Gips verification does not obviate the need for compliance with any other standards.
A minimum of five years of performance records must be made produced according to specified calculations and using only data with guaranteed integrity. The ethos behind qualification is not simply to provide the minimum information, but to ensure the fullest possible disclosure and fair presentation on an ongoing basis.
In the US, Gips is a widely adopted standard, and the industry has had some time to adjust to it. Already in Continental Europe, most investment managers would not expect to get a foot in the door without ticking the Gips-compliant box. In the UK, more than 40 investment management firms now offer Gips, but the take-up is not what its proponents would expect.
The authors past and present of Gips should be proud of their work but in the UK there is still much to be done to build the food chain of information. The fact is, Gips has yet to make its mark here. Few consultants require it, because few plan sponsors ask them. For trustees battling to grasp the implication of Myners, FRS17 and a host of other regulatory initiatives, Gips is just not a priority.
Many consultants privately feel that while Gips offers a good framework, the real judgement about performance is qualitative. They know when, what and whom to ask, and no mere formula is going to replace that skill. Those promoting Gips insist that accreditation helps win and retain business, but at the moment, adopting the global standard remains more of a cost than a benefit.
Another concern is of 'mission creep', the fear that Gips compliance will prove to be an open-ended commitment in terms of cost and resources. Additional demands are already being added : an initiative on derivatives, another recommendation on fees, or pages on what exactly constitutes an investment firm. At what point will a manager be able to declare 'sufficient' transparency?
Those who have already adopted Gips dismiss these developments. They feel the effort must be seen as an essential and ongoing investment to enable any firm to operate in the future. It is true there is wide agreement that going forward, not having Gips will place bidders for mandates at a competitive disadvantage. In the meantime, they say, Gips is an excellent tool to help manage the business.
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