Top Lessons Learned from Conducting a 2020 GIPS Compliance Verification

August 22, 2019 by Paul Blandford


Following the release of the 2020 Global Investment Performance Standards (GIPS®) by CFA Institute on June 28, 2019, firms are encouraged to early adopt the new provisions. One such firm did early adopt, and ACA Performance Services is excited to announce we recently issued our first verification report under the 2020 GIPS Standards.

Below are the top five lessons we learned from conducting this verification:

  1. The new layout of the GIPS standards is easier to follow than the current version.
    There were only certain sections of the new GIPS standards that were relevant to the firm in question. All pertinent provisions, and information on requirements and recommendations, were contained within those sections, and the compartmentalized framework made it easier for the firm to determine which were applicable.
     
  2. The 2020 GIPS Standards provide potential administrative benefits to firms with pooled funds.
    Due to the nature of this firm’s particular business, it was not necessary to create composites in order to come into compliance with the GIPS standards. This made everything easier from an administrative perspective.
     
  3. The updated disclosure requirements for private equity make more sense and produce a more meaningful GIPS Report.
    There was no need for this firm to calculate and present money-weighted returns for each calendar year end. Instead, the firm could present the since-inception return of a fund(s) through the most recent period end only, which eliminates previously required returns and associated statistics that many potential investors would not have found meaningful.
     
  4. The updated 2020 GIPS Standards for Verifiers, and the language used in the verifier’s opinion letter, helps clearly define what testing must be performed.
    The amount of testing ACA performed in order to issue a verification report has not changed substantially from the current version of the GIPS standards. However, the language now used to describe such testing better articulates the detail of that testing to the reader.
     
  5. Firms should have open discussions with their verifier on interpretation of the new provisions.
    As we await the release of an updated GIPS Handbook, we urge all firms to discuss the impact of the 2020 GIPS standards on their claim of compliance. Specifically, your verifier should be able to provide you with industry best practice and benchmarking when it comes to what your peers are doing in relation to any new provisions. In this firm’s case, subscription lines of credit were a hot topic.

NEW! 2020 GIPS Compliance Gap Analysis

The 2020 GIPS Compliance Gap Analysis can assist you in assessing the impact of the 2020 GIPS standards for your GIPS-defined firm. ACA will gain an understanding of the current state of your GIPS compliance program through on-site interviews and a review of materials. ACA will then conduct the gap analysis by identifying each proposed change that will impact your firm and the effort required to meet the new 2020 requirements. Each gap analysis can be highly customized based on the firm. The 2020 GIPS Compliance Gap Analysis results in a summary report and project plan that will assist the firm in implementing the new changes in a seamless and efficient manner.

For more information on the 2020 GIPS Compliance Gap Analysis, please fill out our contact form or call Christie Dillard Horsman at +1 (866) 279-0750.

Resources

Ready to get a jump start on how the 2020 GIPS Standards may impact your firm? ACA Performance Services’ Crista DesRochers and Gabe Glass highlight the material changes to the GIPS standards, including how the final version compares to the 2020 GIPS Standards Exposure Draft. Watch On Demand.

About the Author

Paul Blandford is a Managing Director at ACA Performance (Europe) Limited, a division of ACA Compliance Group. He provides GIPS compliance consulting and verification services to investment managers in the UK and abroad. Paul is a member of the UK Investment Performance Committee and CFA Institute GIPS Verification Subcommittee.