The popularity and worldwide adoption of the the Global Investment Performance Standards (GIPS®) by investment management firms is largely due to demand by asset owners. In the interest of risk management, asset owners increasingly require external investment managers to comply with the GIPS standards. Recently, more asset owners have begun to apply the same principles to their own performance reporting and ACA Performance Services is seeing growing interest in attaining GIPS compliance among the asset owner community.
In September 2018, ACA Performance Services and eVestment released the results from The Value of GIPS Compliance, 2018 Manager and Consultant Survey. 94% of consultants/investors believe more pension funds, foundations, endowments, and other asset owners will claim compliance with the GIPS standards in the next five years.
South Carolina RSIC Announces Compliance with the GIPS Standards
On October 22, 2018, The South Carolina Retirement System Investment Commission (RSIC) announced its compliance with the GIPS standards. RSIC’s compliance with the GIPS standards demonstrates a commitment to embrace the highest standards of performance calculation and reporting which are based on the values of fair representation and full disclosure.
RSIC’s compliance with the GIPS standards was verified by ACA Performance Services for the period of July 1, 2017 through June 30, 2018. ACA Performance Services also conducted a performance examination of the Firm’s Total Fund Composite for the same period.
“We believe that adopting a uniform standard like GIPS is crucial because investment performance is the most significant information we communicate and forms the foundation of trust for our beneficiaries,” said Michael Hitchcock, CEO at RSIC. “We strongly support asset owners like ourselves adopting a consistent set of best practices and standards for investment performance reporting.”
Mr. Hitchcock closed by saying, “I am proud that our organization is among the early adopters of this commitment to enhanced transparency and accountability.”
Why Are More Asset Owners Claiming Compliance with the GIPS Standards?
- Desire to adhere to the same standards as external investment managers
- Need to provide full and transparent performance information, and related disclosures, to participants, beneficiaries, and oversight board
- Improved compliance framework inclusive of standardized policies and procedures related to the calculation and presentation of performance
- To lead by example and promote valuation best practices among external alternative managers
- Provide board and management with additional trust and confidence, resulting in fair and just compensation of management team
- Facilitates solid operational foundation for performance calculation and reporting
- Strengthened organizational governance
- Comprehensive view of total fund assets leads to more effective and accurate benchmark selection
- Independent third-party verification and examination provides additional in-depth review than financial statement audit alone
In the white paper Practical Guidance: the GIPS Standards for Asset Owners, ACA Performance Services provides insight into the following areas:
- Key areas of focus for asset owners when seeking to become GIPS compliant
- Requirements that are different for asset owners as compared to traditional investment managers
- Answers to commonly asked questions
About the Author
Alicia Hyde Spencer, CIPM, is a partner with ACA Performance Services, a division of ACA Compliance Group, which provides GIPS compliance consulting and verification services to investment managers in the United States and abroad. Alicia joined ACA in 2004 after serving as an equity research analyst at Southport Capital. She has worked with over 100 of ACA’s clients and has extensive knowledge of and experience in applying the GIPS standards to various types of firms, helping firms achieve and maintain GIPS compliance, and has a broad perspective on best practices on implementing the GIPS standards. In addition to leading GIPS compliance verifications for traditional managers, alternative managers, and asset owners, she leads consulting engagements and non-GIPS compliant performance reviews that include working with key decision makers to evaluate internal controls and assess risk, review detailed calculations, recommend best practices, propose changes to strengthen operations, and assist in implementing solutions. In addition to her work as an account lead and partner of ACA, Alicia leads ACA Performance’s education, process integration, quality control, and service and delivery initiatives. Alicia also played a principal role in opening ACA Performance’s first satellite office in the New York metro area. Alicia is a member of CFA Institute and the CFA Society of East Tennessee. She is also a committee member of CFA Institute’s GIPS Standards Verification Subcommittee. Alicia co-wrote the white paper Practical Guidance: The GIPS Standards for Asset Owners and has spoken on the topic of GIPS compliance for asset owners at the P2F2 Pension fund conference and the BNY Eagle Exchange conference. Alicia has also presented at numerous ACA GIPS compliance events and webcasts providing updates and covering industry best practices.