The Credit Manager’s Path to Compliance with the 2020 GIPS Standards
Since 2011, institutional investor capital has surged into the credit asset class. As a result, investors and their consultants demand greater transparency. Due to the principles of fair representation and full disclosure, firms are increasingly relying on compliance with the Global Investment Performance Standards (GIPS®) as a competitive advantage. Firms may find that regulatory trends like the new SEC Marketing Rule and FINRA 20-21 make the possibility of GIPS compliance more applicable than in years past. The new SEC Marketing Rule has a final compliance date of November 4, 2022 and includes requirements around the presentation of performance to prospective investors.
We have updated our 2019 white paper to provide the specific tasks that credit managers should focus on while working toward GIPS compliance and, for most managers, adopting the GIPS standards should be an enhancement to their current practices rather than a complete overhaul.
| Investor | Date of Issuance/Deadline | Mandate Name | Mandate (Millions) | GIPS Compliance Requirement |
|---|---|---|---|---|
| LA Police and Fire | May 7, 2021 | Private credit | $300 | Please describe in detail how your returns were calculated and address the following in your response: a) Are all your clients included? b) What was the pricing source of the investments? c) Is the data GIPS compliant? d) Were you returns calculated by your firm or by others? e) Are your returns audited? If so, please provide details. f) Are your returns attributable to the team that would be assigned to LAFPP’s account? |
| City of Los Angeles Department of Fire and Water |
March 22, 2021 | Active extended global credit |
$800 | “The firm must have at least a five-year track record (i.e., not simulated or back-tested), Global Investment Performance Standards (GIPS) compliant performance history for the period ending 12/31/2020 in the proposed Global Credit mandate.” |
| Taiwan Labor Equity | March 2, 2021 | Credit | Not specified | “The evaluation and expression of the proposed product investment performance shall be in line with the requirements of Global Investment Performance Standards (GIPS) as provided by CFA Institute or the standards of other countries, provided that the applicant shall submit a certificate of equivalence of GIPS requirements at the time of application. If the applicant provide with composite performance, each component performance should be GIPS-compliant, or compliant of the standards of other countries. The composite performance does not necessarily be GIPS-compliant, or compliant of the standards of other countries but its construction should be explained in detail. If the standards of other countries are adopted, apart from the original performance track record, please provide the performance data calculated based on GIPS standard. The certificate of equivalence of GIPS requirements shall be issued by local monetary authority, asset management association, accounting firms or GIPS verifiers.” |
| New York State Insurance Fund | February 24, 2021 | Private placement corporate bonds |
Not specified | “Candidate firms must have a minimum of five years of verifiable GIPS-compliant performance history managing the proposed product for institutional clients.” Source |
| New York State Insurance Fund | February 24, 2021 | Credit | Not specified | “Candidate firms must have a minimum of five years of verifiable GIPS-compliant performance history managing the proposed product for institutional clients.” Source |
| Texas Education Agency | January 6, 2021 | US high yield fixed income | Not specified | “Firm confirmation that performance data is prepared according to the calculation methodologies as described in the CFA Institute’s Global Investment Performance Standards (GIPS).” |
Download our white paper
Compliance is Easier Than You Think: The Credit Manager's Path to Compliance with the 2020 Global GIPS Standards
This white paper discusses the rise in demand for GIPS compliance in more detail, and this paper covers specific principles, including firm definition, discretion, composite construction, account and composite return calculations, the GIPS Report, portability, and supplemental information.
Join our Webcast Discussion
Join ACA’s Tanner Beverly, Rosellen Bounds, Shivani Choudhary, and Chase Frei for a webcast discussion on September 29, 2021, at 11 a.m. EDT to review how to claim compliance. During this webcast we will discuss the details covered in the series including:
• firm definition,
• discretion,
• composite construction,
• account and composite return calculations, the
• GIPS Report,
• portability, and
• supplemental information.
The presentation will be followed by an interactive Q&A with our team of performance professionals.
More Information
For more information or questions, please reach out to your ACA consultant or contact us below.
About the Author
Shivani Choudhary, CFA, CIPM, is a Managing Director with ACA Performance Services, a division of ACA Group. Working from our Chicago office, Shivani manages a diverse client base of GIPS compliance verification engagements, as well as conducting performance certifications and focused reviews, for firms of all sizes and asset classes. Prior to joining ACA, Shivani worked for Guggenheim Partners Investment Management as a senior performance measurement associate. Shivani earned her Master of Business Administration (MBA) (Finance emphasis) from the Illinois Institute of Technology and her Bachelor of Science in Engineering (Electronics and Instrumentation) from the Institute of Technology and Management in India. She also has earned a Certificate in Investment Performance Management (CIPM) from the CFA Institute and is a CFA Charterholder.
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