It’s been almost a decade since the CFA Institute unleashed the 2010 Global Investment Performance Standards (GIPS) to homogenize the way asset management firms calculate and report performance to investors. As we head into 2019, the powers that be are attempting to tie up some loose ends.
The weakness of GIPS 2010? In three words — ‘lack of scope’. The guidelines as originally written were not broad enough to cover alternative assets in the capital markets like private equity, real estate, private wealth and so on. All of this resulted in a lack of buy-in from firms who wanted to comply with the standard but whose portfolio management activities didn’t fit neatly into the categories described in the framework.
GIPS compliance has always been more of a gentlemen’s agreement than a regulatory requirement — and its success depends on voluntarily adoption. And so, the GIPS Executive Committee learned the hard way that one size doesn’t fit all.