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Ethical & Professional StandardsModule 4 of 5

Introduction to GIPS

5

Concepts

0

Formulas

1

Decisions

3

Quiz Questions

Key Concepts

5 concepts covered in this module.

GIPS Overview

Global Investment Performance Standards: voluntary, ethical standards for calculating and presenting investment performance. Goal: fair, comparable reporting.

Why GIPS Exists

Without GIPS, firms could cherry-pick best-performing accounts. GIPS creates a level playing field for performance comparison across firms and countries.

Composites

A composite groups all portfolios managed under a similar strategy. Firms MUST include all fee-paying, discretionary portfolios in appropriate composites.

GIPS Key Requirements

Firm-wide compliance (cannot claim partial compliance). Must present at least 5 years of GIPS-compliant data (or since inception if < 5 years). Build to 10 years.

Verification

Voluntary third-party review of GIPS compliance. Applies to the entire firm, not individual composites. Adds credibility but is not required.

Decision Frameworks

1 decision frameworks to guide your analysis.

When must a firm claim GIPS compliance?

  • Compliance is voluntary but once claimed, must apply firm-wide
  • Must include all actual, fee-paying, discretionary portfolios in composites
  • Must present performance net of trading costs at a minimum

Mind Map

Visual overview of how concepts connect in this module.

GIPS Standards
Purpose
Fair comparison
Global standard
Prevent cherry-picking
Investor confidence
Key Rules
Firm-wide compliance
All discretionary portfolios
Composites by strategy
Min 5 years history
Composites
Similar strategy grouping
Must include all eligible
Terminated stay in history
No cherry-picking
Verification
Voluntary
Third-party review
Applies firm-wide
Adds credibility

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