2020 GIPS Standards Exposure Draft Released for Public Comment

September 6, 2018 by Richard Kemmling

CFA Institute released the first major revisions to the GIPS® standards on August 31, 2018. The proposed revisions represent the most significant change to the standards since the 2010 edition of the GIPS standards went into effect on January 1, 2011. The 2020 GIPS Standards Exposure Draft is now available for public comment until December 31, 2018.

The goal of the GIPS standards is universal adoption, acceptance, and support around the world. The proposed changes attempt to accomplish this by allowing more applicability and flexibility for asset managers and asset owners. Some of the initial key takeaways are as follows:

New Layout of the Standards

To facilitate ease of use, the proposed changes to the GIPS standards do not require the reader to navigate multiple sections and guidance statements in order to locate what is applicable to their firm. The new structure separates the recommended and required provisions into three groupings: 

  1. Composites
  2. Pooled Funds
  3. Asset Owner

Guidance specific to certain asset classes (e.g., real estate and private equity) has gone away and in its place is guidance based on the type of vehicle(s) being managed and marketed (segregated account, pooled fund, or asset owner). There is additional guidance to address the particular types of returns that must be shown based on these vehicles (time-weighted or money-weighted returns).  

Composites Vs. Pooled Funds

Composites are now defined as investment strategies for segregated accounts and pooled funds may or may not be included depending on if the composite or the fund itself is the vehicle being shown to the prospect. If standalone strategies do exist that only use a fund structure, then composites are no longer necessary to house these single funds. 

Money-Weighted Returns

As mentioned above, the exposure draft eliminates guidance specific to particular asset classes and instead focuses on methodology-based requirements. In short, time-weighted returns must be shown when a manager does not control the external flows into a portfolio and money-weighted returns can be shown if the manager controls the external flows – along with some additional criteria. This will allow some managers of very illiquid products or closed-end funds to show a more meaningful performance number to their prospective investors.

Compliant Presentation = GIPS Compliance Report

The term "compliant presentation" is going away and, in its place (and depending on the product), the firm will offer the following:

  1. GIPS Composite Report (composite prospects)
  2. GIPS Pooled Fund Report (required for limited distribution funds but recommended for broadly distributed funds), or
  3. GIPS Asset Owner Report

Firms must make annual updates and the report must be given to prospective investors once a year. The proposal specifies that all firms must update this report within six months of the last annual year-end period.

Advisory-Only Assets

These assets include model delivery, UMA accounts, or other situations where investment recommendations are provided, but the firm has no control of the implementation of the investment decisions and no trading authority for the assets. The GIPS standards will allow firms to present these assets, but not combine them with assets under management (AUM).

Estimated Transaction Costs

Firms will be allowed to estimate transaction costs as long as the estimate results in performance that is equal to or lower than what would have been achieved if actual transaction costs were used. This will allow firms that use estimated transaction costs to show gross-of-fee returns without having to label them as supplemental information and will also enable those firms to show gross-of-fee returns on a standalone basis (without showing the accompanying net-of-fee returns).

Investment Track Record Portability

Linking a performance track record has once again become optional for firms. Additionally, when a firm acquires a non-compliant entity, the firm has one year to bring those assets in compliance, but only must do so on a prospective basis (not required to do historically) as of the acquisition date.


The GIPS standards will once again allow firms to take a separately managed investment strategy that is part of a multi-strategy portfolio and show it on a standalone basis with a cash allocation. While the preference is still for these accounts to be managed separately with their own cash, firms will be allowed to allocate cash returns using a consistent methodology.

External Valuations

Private market investments will be required to have an external valuation annually, but several new options will exist in order to satisfy this requirement: external valuation, review of valuation inputs by an outside party, and/or a financial statement audit.

GIPS Standards Advertising Guidelines

The optional GIPS Standards Advertising Guidelines will be significantly expanded. There will now be sections for composite reporting, limited distribution pooled funds reporting, and broadly distributed pooled funds reporting. This will primarily give broadly distributed pooled fund managers the ability to leverage their claim of GIPS compliance in the public areas of their marketing initiatives.

Asset Owner Section

There are many updates to the requirements and recommendations for asset owners. One is that they will be required to have policies and procedures to track distribution of their GIPS Standards Asset Owner Report, which must be done annually. Additionally, if an asset owner begins to sell a part of their investment management expertise to outside parties then those assets must become a separate GIPS-defined firm.

ACA Guidance

There is no doubt the proposed changes are vast and leave the industry with a lot to absorb and process over the next few months. Given that the GIPS standards are generally recognized as industry best practice, we are excited about the exposure draft and hope that it ultimately encourages stronger adoption. ACA will provide more in-depth discussion of the 2020 GIPS Standards in the next few months. 

About the Author

Richard J. Kemmling, CPA, CIPM, CGMA is a Partner at ACA Performance Services, a division of ACA Compliance Group. His primary responsibilities include serving as a partner on GIPS compliance verification engagements, as well as performance certifications and focused performance reviews. He also co-leads the division’s executive committee. Richard has worked with firms of all sizes and asset classes around the world. He is a frequent speaker globally on the GIPS standards and has been quoted and interviewed by several industry media outlets. Prior to joining ACA, Richard served as a partner and president of a large global verification firm. He earned his Bachelor of Arts degree in Accounting from the University of Washington and an MBA from the University of Chicago’s Booth School of Business.