Why Is a Global Investment Performance Standard Needed?
Standardized Investment Performance
Financial markets and the investment management industry have become increasingly global in nature. The growth in the types and number of financial entities, the globalization of the investment process, and the increased competition among investment management firms demonstrate the need to standardize the calculation
and presentation of investment performance.
Global Passport
Asset managers and both existing and prospective clients benefit from an established global standard for calculating and presenting investment performance. Investment practices, regulation, performance measurement, and reporting of performance vary considerably from country to country. By adhering to a global standard, firms in countries with minimal or no investment performance standards will be able to compete for business on an equal footing with firms from countries with more developed standards. Firms from countries with established practices will have more
confidence in being fairly compared with local firms when competing for business in countries that have not previously adopted performance standards. Performance standards that are accepted globally enable investment firms to measure and present their investment performance so that investors can readily compare investment performance among firms.
Investor Confidence
Investment managers that adhere to investment performance standards help assure investors that the firm’s investment performance is complete and fairly presented. Both prospective and existing clients of investment firms benefit from a global investment performance standard by having a greater degree of confidence in the performance
information presented to them.
Objectives
The establishment of a voluntary global investment performance standard leads to an accepted set of best practices for calculating and presenting investment performance that is readily comparable among investment firms, regardless of geographic location.
These standards also facilitate a dialogue between investment firms and their existing and prospective clients regarding investment performance.
The goals of the GIPS Executive Committee are:
- To establish investment industry best practices for calculating and presenting investment performance that promote investor interests and instill investor confidence;
- To obtain worldwide acceptance of a single standard for the calculation and presentation of investment performance based on the principles of fair representation and full disclosure;
- To promote the use of accurate and consistent investment performance data;
- To encourage fair, global competition among investment firms without creating barriers to entry; and
- To foster the notion of industry “self-regulation” on a global basis.
