2020 GIPS Standards for Firms

• The CFA Institute established the GIPS standards to ensure ethical investment performance reporting through fair representation and full disclosure.
• Compliance with these standards serves as a global passport for firms to market investment management services across international borders.
• The standards evolved from the 1995 AIMR-PPS to a unified global framework that eliminated the need for local or country-specific variations.
• Governance of the standards transitioned from the Investment Performance Council to the GIPS Executive Committee to facilitate broader international involvement.
• The scope of the standards has expanded over time to include diverse asset classes such as real estate and private equity, as well as advertising and fee disclosures.

Compliance with the GIPS standards has become a firm’s “passport” to market investment management services globally.

• The CFA Institute restructured its governance by creating the GIPS Executive Committee and Council to oversee the development and promotion of global performance standards.
• The 2020 edition of the GIPS standards was developed to better accommodate pooled funds, alternative investments, and high-net-worth client managers.
• New distinctions were established in the 2020 update to provide separate, tailored provisions for investment firms and non-marketing asset owners.
• The standards serve as a 'global passport,' allowing firms in countries with minimal regulations to compete on an equal footing with those in highly developed markets.
• Standardization of performance calculation is essential to address the increasing globalization of financial markets and the diversity of international reporting practices.

By adhering to a global standard, firms in countries with minimal or no investment performance standards can compete for business on an equal footing with firms from countries with more-developed standards.

• The GIPS standards establish a global benchmark that allows investment firms in developing markets to compete on an equal footing with those in established financial hubs.
• Adherence to these ethical standards is designed to instill investor confidence by ensuring that performance data is complete, consistent, and fairly presented.
• The mission of the standards is to promote industry self-regulation and universal integrity for the ultimate benefit of the global investment community.
• A core requirement is the creation of composites for all strategies, which prevents firms from 'cherry-picking' their best-performing accounts to mislead prospective clients.
• Beyond mere compliance with minimum requirements, firms are encouraged to adopt best-practice recommendations to achieve full disclosure and fair representation.

These requirements prevent firms from cherry-picking their best performance.

• The GIPS standards mandate the use of composites or pooled funds to prevent firms from cherry-picking their best-performing accounts.
• Firms must initially present five years of compliant performance, eventually building up to a minimum ten-year historical record.
• While firms can self-claim compliance, independent third-party verification is considered a best practice to provide assurance on firm-wide policies.
• The ultimate goal of the standards is to establish a globally accepted format for fair, comparable, and fully disclosed investment performance.
• Accurate performance presentations rely heavily on the integrity of input data and the underlying valuations of portfolio holdings.

These requirements prevent firms from cherry-picking their best performance.

• The primary objective of GIPS is to establish a single worldwide standard for fair and comparable investment performance disclosure.
• The standards rely on a self-regulatory framework that requires a strong commitment to ethical integrity from participating firms.
• In instances where local laws conflict with GIPS standards, firms must prioritize legal compliance while disclosing the conflict in their reports.
• Local GIPS Standards Sponsors serve as essential links between regional markets and governing bodies to promote and protect approved translations.
• Regulators are encouraged to support the standards by taking enforcement action against firms that falsely claim compliance.

Compliance with applicable laws and regulations does not necessarily lead to compliance with the GIPS standards.

• The text lists a vast network of international financial organizations and CFA societies that support the Global Investment Performance Standards (GIPS).
• Participating countries range from emerging markets like Ghana and Kazakhstan to established financial hubs like the United Kingdom and the United States.
• The 2020 Edition of the GIPS Standards is structured into three distinct chapters tailored for firms, asset owners, and verifiers.
• Compliance for firms is built upon fundamental principles such as legal adherence and the requirement to provide reports to all prospective investors.

Organizations that compete for business must comply with the GIPS Standards for Firms.

• The GIPS Standards for Firms are categorized into eight distinct sections designed to ensure ethical performance reporting.
• Fundamentals of compliance require firms to establish clear boundaries for total assets and define the criteria for discretionary portfolios.
• Uniformity in input data and calculation methodologies is mandated to allow for fair comparability between different investment management firms.
• Composites are formed by aggregating portfolios with similar mandates, using asset-weighted averages to represent collective performance.
• Specific reporting sections provide self-contained requirements for both time-weighted and money-weighted returns for composites and pooled funds.

The firm’s definition of discretion establishes criteria to judge which portfolios must be included in a composite and is based on the firm’s ability to implement its investment strategies.

• Firms must apply GIPS standards on a firm-wide basis rather than for individual composites, pooled funds, or portfolios.
• To claim compliance, a firm must meet all requirements for at least five years or since its inception if it has existed for a shorter period.
• Firms are responsible for including additional information not addressed by the standards if it is necessary to provide proper context for performance.
• A GIPS Compliance Notification Form must be submitted to the CFA Institute upon the initial claim of compliance and annually thereafter.
• While negative assurance disclosures are not required, firms must adhere to specific advertising guidelines if they wish to claim compliance in promotional materials.

No finite set of requirements can cover all potential situations or anticipate future developments in investment industry structure, technology, products, or practices.

• Compliance with GIPS standards must be established on a firm-wide basis rather than for individual portfolios or funds.
• Firms are required to maintain at least five years of compliant performance history to initially claim compliance.
• The standards strictly prohibit claims of partial compliance or statements suggesting a methodology is merely 'consistent' with GIPS.
• Firms must document all policies and procedures and apply them consistently to ensure the integrity of performance reporting.
• There is a mandatory obligation to provide GIPS reports to all prospective clients and investors at the initial point of contact.
• The prohibition against false or misleading performance information applies to all firm data, even if it does not specifically reference GIPS.

The firm must not represent or state that it is “in compliance with the Global Investment Performance Standards except for... ” or make any other statements that may indicate compliance or partial compliance with the GIPS standards.

• Firms must provide updated GIPS composite or pooled fund reports to prospective clients at least once every 12 months.
• The standards prohibit firms from selectively choosing which prospective investors receive a GIPS report to ensure fair representation.
• Benchmarks used in reports must accurately reflect the investment mandate and cannot be limited to price-only indices.
• Material errors in reports require mandatory correction and distribution to current verifiers, clients, and prospective investors.
• Firms are required to demonstrate that they made every reasonable effort to provide the necessary reports to all eligible prospective investors.

The firm must not choose to which limited distribution pooled fund prospective investors it presents a gips report.

• Firms must correct material errors in GIPS pooled fund reports and notify current verifiers, current investors, and prospective investors who received the erroneous data.
• A comprehensive list of composite and pooled fund descriptions must be maintained and provided to prospective clients or investors upon request.
• Firms are strictly prohibited from linking actual performance results to historical theoretical performance within their reporting.
• Organizational changes within a firm are not permitted to result in the alteration of historical performance records.
• The firm bears ultimate responsibility for its claim of compliance, including the accuracy of data provided by third-party sources.

The firm must not link actual performance to historical theoretical performance.

• Firms are strictly prohibited from linking actual performance results to historical theoretical performance in their reports.
• Organizational changes within a firm must not result in the alteration of historical performance records.
• Non-GIPS-compliant performance may only be linked to compliant performance if it occurred prior to the minimum effective compliance date.
• Past performance from an acquired firm can only be linked if the decision-making team and process remain substantially intact and independent.
• Acquiring firms are granted a one-year grace period to bring non-compliant assets into full compliance with GIPS standards.

The firm must not link actual performance to historical theoretical performance.

• Acquiring firms are granted a one-year grace period to bring non-compliant assets into alignment with GIPS standards.
• Firms must strictly separate and refrain from linking performance records that occurred before and after a break in track record.
• Money-weighted returns are only permitted if the firm maintains control over external cash flows and the fund meets specific illiquidity or structural criteria.
• Firms claiming compliance must submit an initial notification to the CFA Institute and provide annual updates by June 30th.
• The standards recommend adopting the broadest possible definition of a firm, encompassing all geographical offices under a single brand name.
• Firms are encouraged to undergo independent verification and provide annual composite reports to all current clients and investors.

The firm must not link performance prior to the break in the track record to the performance after the break in the track record.

• Firms are required to provide current clients and limited distribution pooled fund investors with annual GIPS reports specific to their investment strategy.
• Total firm assets must represent the aggregate fair value of all discretionary and non-discretionary portfolios, including those assigned to sub-advisors.
• Calculation methodologies strictly prohibit the double counting of assets and the inclusion of advisory-only assets or uncalled committed capital.
• Performance and asset totals must be calculated based on actual assets managed and must be reported net of discretionary leverage.
• Overlay strategy portfolios require specific calculation methods using notional exposure or target exposure to ensure consistency across composites.
• Standardized accounting practices, including the use of total returns and trade date accounting, are mandatory for GIPS compliance.

Total firm assets, composite assets, and pooled fund assets must be calculated net of discretionary leverage and not grossed up as if the leverage did not exist.

• Firms must use total returns and trade date accounting to ensure consistency and accuracy in performance reporting.
• Accrual accounting is mandatory for fixed-income securities, requiring that earned interest be included in portfolio valuations.
• Returns for periods shorter than one year must not be annualized to prevent misleading performance projections.
• Transaction costs must be deducted from all returns, with specific rules for handling bundled fees when costs cannot be segregated.
• Valuations must adhere to fair value principles, requiring firms to reconcile any differences between estimated and final values.

Returns for periods of less than one year must not be annualized.

• Firms must value portfolios based on fair value and adhere to specific composite or pooled fund valuation policies.
• If historical or estimated prices are used, firms must assess the difference against final values and adjust performance records accordingly.
• Composites and pooled funds are required to maintain consistent annual valuation dates, typically aligned with the calendar year end.
• Time-weighted returns for most portfolios must be calculated at least monthly and specifically on the date of any 'large cash flow' as defined by the firm.
• External cash flows must be handled through geometric linking of sub-period returns or daily weighting to ensure calculation consistency.

The firm must define large cash flow for each composite to determine when portfolios in that composite must be valued.

• Firms must adjust for daily-weighted external cash flows when calculating portfolio returns if daily returns are not already utilized.
• Pooled funds not included in a composite require valuation at least annually and specifically at the time of any subscriptions or redemptions.
• Money-weighted return calculations must use daily external cash flows and include stock distributions valued at the time of distribution.
• Composite net-of-fees returns must be calculated using either actual investment management fees or a model fee appropriate for prospective clients.
• The standards mandate the geometric linking of periodic and sub-period returns to ensure accurate time-weighted performance tracking.

The firm must establish a pooled fund inception date for each pooled fund to determine when the pooled fund’s track record begins.

• Firms using model investment management fees must ensure the resulting net returns are equal to or lower than those calculated with actual fees.
• Composite time-weighted returns must generally be calculated at least monthly, while private market investment portfolios require at least quarterly valuation.
• Specific asset-weighting methods, such as using beginning-of-period values or the aggregate method, are mandated for calculating composite returns.
• Performance-based fee clawbacks must be reflected in the specific period in which the funds are repaid to ensure accurate reporting.
• Private market investment returns must adjust for daily-weighted external cash flows and geometrically link periodic returns.

If the firm uses model investment management fees to calculate composite net-of-fees returns, the returns calculated must be equal to or lower than those that would have been calculated using actual investment management fees.

• Firms must calculate portfolio returns at least quarterly, ensuring they align with calendar quarter ends or the final business day.
• Calculations are required to adjust for daily-weighted external cash flows and maintain consistency in methodology across individual portfolios.
• Real estate investments generally require an external valuation every 12 months, though certain client agreements may extend this to 36 months.
• External valuations for real estate must be conducted by independent, certified professionals whose fees are not contingent on the property's appraised value.
• When reporting on carve-outs, investment management fees must accurately reflect what would be charged to a prospective client for a standalone portfolio.

The firm must not use external valuations for real estate investments when the valuer’s or appraiser’s fee is contingent upon the investment’s appraised value.

• Firms are prohibited from using external real estate valuations if the appraiser's fee is contingent upon the resulting investment value.
• Performance reporting for carve-outs and wrap fee portfolios must reflect representative or total fees to ensure transparency for prospective clients.
• Composite and pooled fund returns must incorporate the financial effects of discretionary side pockets and subscription lines of credit.
• The standards establish a strict valuation hierarchy, prioritizing objective, observable market prices over subjective, unobservable inputs.
• Firms are encouraged to adopt accrual accounting for dividends and investment management fees to maintain consistency in reporting.

The firm must not use external valuations for real estate investments when the valuer’s or appraiser’s fee is contingent upon the investment’s appraised value.

• Firms must use subjective, unobservable inputs for fair value measurements only when observable market data is unavailable.
• All actual, fee-paying, discretionary segregated accounts must be included in at least one composite to ensure performance transparency.
• Composite definitions must be based on investment mandate or strategy and cannot be changed retroactively to manipulate historical data.
• Terminated portfolios must remain in historical composite performance records up to the last full period they were under management.
• Portfolios cannot be moved between composites due to tactical changes, only through documented shifts in client mandates or strategy redefinitions.

Portfolios must not be moved into or out of composites as a result of the firm’s tactical changes.

• Firms must strictly adhere to ex ante policies regarding minimum asset levels and significant cash flow definitions to prevent performance manipulation.
• Wrap fee portfolios must be included in appropriate composites and used specifically when presenting to prospective wrap fee clients.
• Carve-outs included in composites must include cash, either accounted for separately or allocated synthetically on a consistent basis.
• The standards prohibit the creation of simulated strategies by combining different composites, pooled funds, or carve-outs.
• Firms are required to present at least five years of GIPS-compliant performance, eventually building up to a minimum ten-year history.

The firm must not combine different composites, pooled funds, or carve-outs to create a simulated strategy and present it as a composite.

• Firms must initially present five years of GIPS-compliant performance, eventually building up to a minimum ten-year track record.
• Annual reports must include composite returns, benchmark returns, the number of portfolios, and total firm assets for each period.
• Internal dispersion and three-year annualized ex post standard deviation are required to measure the volatility and consistency of returns.
• Specific disclosures are mandated for subjective valuations, non-fee-paying portfolios, and the use of carve-outs with allocated cash.
• If a composite loses all member portfolios, the track record must end and cannot be linked to future performance if the composite restarts.

The firm must not link performance prior to the break in track record to the performance after the break in track record.

• Firms must disclose the percentage of composite assets represented by non-fee-paying portfolios when net-of-fees returns are calculated using actual fees.
• Specific labeling and period-matching requirements apply when firms choose to present uncalled committed capital alongside total assets.
• Advisory-only assets reflecting a composite's mandate must be clearly labeled and presented for the same periods as the combined asset totals.
• All financial information within a GIPS Composite Report must be presented in a single, consistent currency to ensure comparability.
• Firms using carve-outs with allocated cash must also present the performance and assets of any existing standalone portfolio composite using the same strategy.

All required and recommended information in the gips composite report must be presented in the same currency.

• The standards establish specific reporting requirements for overlay strategy composites, allowing firms to present overlay exposure instead of total assets.
• Wrap fee composites must present performance net of the entire wrap fee and clearly label any pure gross-of-fees returns as supplemental information.
• Supplemental information included in reports must relate directly to the composite and cannot contradict any required or recommended data.
• The guidelines recommend presenting both gross and net returns, along with cumulative, equal-weighted, and annualized performance metrics.
• Firms are encouraged to provide more than 10 years of annual performance and disclose the use of preliminary estimated values in fair value calculations.

Any supplemental information included in the gips composite report: Must not contradict or conflict with the required or recommended information in the gips composite report.

• Firms are encouraged to present more than 10 years of annual performance and additional ex post risk measures for composites.
• Specific reporting requirements apply to real estate composites and the disclosure of uncalled committed capital.
• Firms must use standardized compliance statements to claim adherence to the Global Investment Performance Standards.
• Verification provides assurance on firm-wide policies and procedures but does not guarantee the accuracy of specific performance reports.
• A complete compliance statement for a verified firm must include two specific paragraphs presented together.

Verification does not provide assurance on the accuracy of any specific performance report.

• Firms must use specific, verbatim compliance statements depending on whether they have undergone independent verification.
• The CFA Institute requires a mandatory trademark disclosure stating they do not endorse the organization or warrant the quality of the content.
• Detailed disclosures are required for fee structures, including the distinction between gross-of-fees and net-of-fees returns and the use of model versus actual fees.
• Firms must clearly define the reporting currency, internal dispersion measures, and the specific fee schedules applicable to different investment strategies.
• Specific rules apply to the presentation of performance for pooled funds, wrap fee composites, and multi-asset strategy portfolios.

CFA Institute does not endorse or promote this organization, nor does it warrant the accuracy or quality of the content contained herein.

• Firms must provide comprehensive transparency regarding fee structures, including total wrap fees, pooled fund expense ratios, and performance-based fee descriptions.
• The standards mandate the disclosure of historical use of leverage, derivatives, and short positions to ensure prospective clients understand the risk profile of the strategy.
• Firms are required to disclose significant events and organizational redefinitions that could impact a client's interpretation of the historical track record.
• Specific protocols are established for disclosing non-compliance periods, changes in composite names, and conflicts between GIPS standards and local laws.
• Detailed reporting is required for carve-outs with allocated cash, including the specific policy used for cash allocation and the availability of standalone portfolio reports.

If the gips composite report conforms with laws and/or regulations that conflict with the requirements of the GIPS standards, the firm must disclose this fact and disclose the manner in which the laws and/or regulations conflict with the GIPS standards.

• Firms must disclose the minimum asset levels for composite inclusion and any subsequent changes to those thresholds.
• Specific transparency is required regarding withholding taxes on both composite and benchmark returns to ensure material accuracy.
• In cases of regulatory conflict, firms must explicitly disclose where local laws deviate from GIPS standards.
• Strict protocols govern the use of carve-outs, sub-advisors, and custom benchmarks to prevent the misrepresentation of performance data.
• Firms are required to explain the absence of a benchmark or provide detailed histories for any benchmark changes made over time.

If the gips composite report conforms with laws and/or regulations that conflict with the requirements of the GIPS standards, the firm must disclose this fact and disclose the manner in which the laws and/or regulations conflict with the GIPS standards.

• Firms must disclose specific methodologies for significant cash flows, error corrections, and changes in return types to ensure transparency.
• Strict rules govern the reporting of internal dispersion and portfolio counts when a composite contains five or fewer portfolios.
• The standards mandate clear labeling of theoretical performance, including the methodology and assumptions used to derive non-actual results.
• Specific asset classes like real estate and overlay strategies require specialized disclosures regarding valuations and collateral income.
• Material errors in past reports must be disclosed for at least one year to assist investors in interpreting the historical track record.

Disclose that the results are theoretical, are not based on the performance of actual assets, and if the theoretical performance was derived from the retroactive or prospective application of a model.

• Firms must explicitly label and disclose the methodology behind theoretical performance to ensure it is not confused with actual asset results.
• Comprehensive disclosures are required for material changes in valuation or calculation policies to maintain transparency with prospective investors.
• Firms presenting money-weighted returns must provide annualized since-inception data for both the composite and its benchmark.
• Specific reporting mandates apply to the use of subscription lines of credit, requiring returns to be shown both with and without their impact.
• Disclosure requirements extend to the structure of the firm, including lists of other firms within a parent company and the nature of bundled fees.

If a subscription line of credit is used, the firm must present the composite since-inception money-weighted return both with and without the subscription line of credit through the most recent annual period end.

• Firms must disclose the number of portfolios, composite assets, and total firm assets for the most recent annual period end.
• Specific reporting rules apply to money-weighted returns when subscription lines of credit are used, requiring dual presentation unless strict repayment criteria are met.
• The standards mandate the disclosure of the percentage of assets valued using subjective, unobservable inputs if they are material.
• For composites with committed capital, firms must present a comprehensive suite of multiples including TVPI, DPI, PIC, and RVPI.
• Firms are required to clearly label fee structures, benchmark information, and the presence of non-fee-paying portfolios or carve-outs.

The firm must present the composite since-inception money-weighted return both with and without the subscription line of credit through the most recent annual period end.

• Firms must strictly label and present uncalled committed capital alongside composite assets to ensure transparency in reporting.
• Specific requirements apply to the presentation of advisory-only assets, requiring they be clearly distinguished from firm-wide or composite assets.
• All financial data within a GIPS composite report must be presented using a single, consistent currency to prevent confusion.
• Supplemental information is permitted only if it relates directly to the composite and does not contradict any required disclosures.
• Recommendations for composites with committed capital include presenting cumulative distributions and investment multiples like TVPI.

Any supplemental information included in the gips composite report: Must not contradict or conflict with the required or recommended information in the gips composite report.

• Firms are recommended to present annualized since-inception money-weighted returns for each annual period end.
• For portfolios with committed capital, specific multiples such as TVPI, DPI, PIC, and RVPI must be reported to show capital flow and valuation.
• Reporting standards require the disclosure of proprietary assets and the use of preliminary estimated values within the composite.
• Firms must use standardized compliance statements to claim adherence to GIPS, distinguishing between general verification and specific performance examinations.
• Verification provides assurance on firm-wide policies and procedures but does not guarantee the accuracy of any specific performance report.

Verification does not provide assurance on the accuracy of any specific performance report.

• Firms must use specific, standardized language when claiming compliance with GIPS standards, depending on whether they have undergone independent verification.
• Verification provides external assurance that a firm's policies for performance calculation and presentation are implemented on a firm-wide basis.
• Mandatory disclosures include the definition of the firm, composite and benchmark descriptions, and the reporting currency used.
• Detailed transparency is required regarding fee structures, specifically distinguishing between gross-of-fees and net-of-fees returns and the use of model versus actual fees.
• Firms are prohibited from modifying the compliance statement except for additive changes, ensuring the integrity of the CFA Institute's trademarked standards.

CFA Institute does not endorse or promote this organization, nor does it warrant the accuracy or quality of the content contained herein.

• Firms must disclose specific fee structures, including performance-based fees, carried interest, and expense ratios for pooled funds.
• The standards mandate the disclosure of composite inception and creation dates, as well as the availability of valuation and calculation policies upon request.
• Firms are required to explain the historical use of leverage, derivatives, and short positions if they are material to the performance results.
• Significant events, name changes, or redefinitions of the firm or composite must be disclosed for at least one year to ensure transparency.
• If a firm follows local laws that conflict with GIPS standards, it must explicitly disclose the nature of the conflict and the specific regulations involved.
• The use of sub-advisors and the methodology for allocating cash to carve-outs must be clearly documented in the composite report.

If the gips composite report conforms with laws and/or regulations that conflict with the requirements of the GIPS standards, the firm must disclose this fact and disclose the manner in which the laws and/or regulations conflict with the GIPS standards.

• Firms must provide detailed disclosures regarding the use of sub-advisors and any material deviations from recommended valuation hierarchies.
• Strict protocols are established for benchmark changes, requiring descriptions of both prospective and retroactive adjustments to ensure track record transparency.
• Specific reporting mandates apply to the use of subscription lines of credit, including their purpose and the total amount outstanding at year-end.
• Material errors in reports must be disclosed for at least one year, though this disclosure is not required for new prospects who never saw the erroneous data.
• The standards require transparency regarding the frequency of cash flows and the use of preliminary or estimated values in determining fair value.

Following the correction of the gips composite report, this disclosure must be included for a minimum of one year and for as long as it is relevant to interpreting the track record.

• Firms must disclose the use of preliminary or estimated values in fair value determinations to ensure transparency in asset valuation.
• Any change in return calculation methodology, such as switching from time-weighted to money-weighted returns, must be disclosed for at least one year.
• Theoretical performance included as supplemental information requires rigorous disclosure regarding its non-actual nature and the assumptions used in its modeling.
• For real estate investments, firms are required to disclose whether they rely on external valuations or financial statement audits for asset pricing.
• The standards recommend disclosing material changes to valuation and calculation policies, as well as any limitations inherent in chosen benchmarks.

Disclose that the results are theoretical, are not based on the performance of actual assets, and if the theoretical performance was derived from the retroactive or prospective application of a model.

• Firms must disclose key valuation assumptions and the specific types of fees included in bundled fee structures.
• The standards require a minimum of five years of GIPS-compliant performance history, eventually building up to a ten-year record.
• Firms are obligated to report the percentage of assets valued using subjective unobservable inputs if they represent a material amount.
• Annual reporting must include total firm assets, pooled fund assets, and three-year annualized ex post standard deviation for both the fund and its benchmark.
• Specific disclosures are required for research costs, benchmark limitations, and the relationship between firms under a single parent company.

The firm must present the percentage of the total fair value of pooled fund assets that were valued using subjective unobservable inputs.

• Firms must strictly label the periods presented and specify whether returns are gross or net to ensure transparency.
• Specific disclosure requirements apply to uncalled committed capital and advisory-only assets to prevent the inflation of fund size perceptions.
• All financial data within a GIPS pooled fund report must be presented in a single, consistent currency.
• Supplemental information is permitted only if it relates directly to the fund and does not contradict required disclosures.
• The standards recommend presenting both gross and net returns alongside cumulative and annualized data for comprehensive performance tracking.

Any supplemental information included in the gips pooled fund report: Must not contradict or conflict with the required or recommended information in the gips pooled fund report.

• Firms are encouraged to present both gross and net returns for pooled funds to ensure transparency in performance reporting.
• The standards recommend providing cumulative, annualized, and periodic returns alongside relevant ex post risk measures like standard deviation.
• Specific disclosures are required for specialized assets, including real estate component returns and the percentage of assets valued using preliminary estimates.
• A formal compliance statement is mandatory, distinguishing between firms that have undergone general verification and those that have had specific performance examinations.

Verification does not provide assurance on the accuracy of any specific performance report.

• Firms must use specific, standardized language when claiming compliance with GIPS, depending on whether they have undergone independent verification.
• Verification provides assurance on firm-wide policies and procedures but does not guarantee the accuracy of any specific performance report.
• The CFA Institute requires a mandatory disclaimer stating they do not endorse the organization or warrant the quality of the content provided.
• Detailed disclosures are required for pooled funds, including benchmark descriptions, fee structures, and the methodology for calculating net returns.
• Firms must explicitly define the 'firm' used for asset determination and disclose if model fees were used in place of actual costs.

Verification does not provide assurance on the accuracy of any specific performance report.

• Firms must provide detailed transparency regarding the calculation of net returns, including the specific methodologies for model fees and share classes.
• The standards mandate the disclosure of historical use of leverage, derivatives, and short positions to ensure investors understand the fund's risk profile.
• Firms are required to disclose significant events, name changes, or strategy shifts for at least one year to help investors interpret the track record accurately.
• In cases of regulatory conflict, firms must explicitly disclose where local laws deviate from GIPS requirements to maintain reporting integrity.
• The disclosure of sub-advisor usage and the absence of appropriate benchmarks are required to prevent misleading performance comparisons.

If the gips pooled fund report conforms with laws and/or regulations that conflict with the requirements of the GIPS standards, the firm must disclose this fact and disclose the manner in which the laws and/or regulations conflict with the GIPS standards.

• Firms must disclose any redefinitions of the firm or changes to a pooled fund's investment mandate, strategy, or name to ensure historical transparency.
• Specific tax treatments, including whether returns are gross or net of withholding taxes for both funds and benchmarks, must be clearly stated if material.
• The standards require explicit disclosure when local laws or regulations conflict with GIPS requirements, including an explanation of the nature of the conflict.
• Detailed reporting is mandated for benchmark changes, custom benchmark compositions, and the reasons why a benchmark might be omitted entirely.
• Firms are obligated to disclose the correction of material errors in past reports for at least one year to maintain the integrity of the track record.

If the gips pooled fund report conforms with laws and/or regulations that conflict with the requirements of the GIPS standards, the firm must disclose this fact and disclose the manner in which the laws and/or regulations conflict with the GIPS standards.

• Firms must provide detailed disclosures for any benchmark changes, including descriptions and dates for both prospective and retroactive adjustments.
• Custom benchmarks require explicit labeling and disclosure of components, weights, rebalancing processes, and calculation methodologies.
• Material errors must be corrected and disclosed for at least one year, though this notice is not required for new investors who never saw the original error.
• Theoretical performance presented as supplemental information must be clearly labeled as such and include a description of the underlying model or backtesting assumptions.
• Specific reporting requirements apply to real estate investments, including the frequency of external valuations or reliance on financial statement audits.

The firm must disclose any change to the gips pooled fund report resulting from the correction of a material error.

• Firms must provide a basic description of methodologies and assumptions used for theoretical performance to ensure prospective investors can interpret model or backtested data.
• The standards recommend disclosing material changes to valuation and calculation policies, as well as any significant differences between a fund's strategy and its benchmark.
• Pooled fund reports must include annualized since-inception money-weighted returns and total firm assets as of the most recent annual period end.
• If a subscription line of credit is utilized, firms are generally required to present returns both with and without the impact of that credit line.
• Firms should disclose how research costs are reflected in returns and identify other firms within the same parent company.

If a subscription line of credit is used, the firm must present the pooled fund since-inception money-weighted return both with and without the subscription line of credit through the most recent annual period end.

• Firms must present pooled fund money-weighted returns both with and without the impact of subscription lines of credit unless specific short-term repayment criteria are met.
• Reporting requirements mandate the disclosure of the percentage of assets valued using subjective unobservable inputs if they represent a material portion of the fund.
• For funds with committed capital, firms must provide a comprehensive suite of multiples including TVPI, DPI, PIC, and RVPI to show investment performance and realization.
• The standards require clear labeling of gross versus net returns and the explicit identification of uncalled committed capital when combined with total assets.
• Firms are obligated to present a pooled fund expense ratio that is appropriate and transparent for prospective investors.

The firm must present the pooled fund since-inception money-weighted return both with and without the subscription line of credit through the most recent annual period end.

• Firms must strictly label and separate uncalled committed capital from actual pooled fund assets to ensure transparency in financial reporting.
• Advisory-only assets must be clearly distinguished from pooled fund assets and must align with the specific investment mandate or strategy.
• All financial data within a GIPS pooled fund report must be presented in a single, consistent currency to prevent misleading comparisons.
• Supplemental information is permitted only if it directly relates to the fund and does not contradict any required or recommended disclosures.
• For funds with committed capital, firms are encouraged to report specific performance multiples including TVPI, DPI, and PIC.

Any supplemental information included in the gips pooled fund report: Must not contradict or conflict with the required or recommended information.

• Firms must report specific capital metrics including paid-in capital, distributions, and committed capital multiples like TVPI and DPI.
• The standards require disclosure of proprietary assets, uncalled committed capital, and the use of preliminary estimated values in fair value calculations.
• Firms must present an ex post risk measure for both the pooled fund and its benchmark to ensure comparative transparency.
• Specific compliance statements are mandated to clarify whether a firm has undergone independent verification or a performance examination.
• Verification provides assurance on firm-wide policies and procedures but does not guarantee the accuracy of any specific performance report.

Verification does not provide assurance on the accuracy of any specific performance report.

• Firms must use specific, standardized language when claiming compliance with GIPS, including explicit statements regarding whether they have undergone independent verification.
• Verification ensures that a firm's policies for performance calculation and distribution are implemented on a firm-wide basis rather than just for specific funds.
• The CFA Institute requires a mandatory disclaimer stating they do not endorse the organization or warrant the accuracy of the reported performance data.
• Detailed disclosures are required for pooled funds, including the methodology for calculating net returns and the specific fees or carried interest deducted.
• Firms must provide clear definitions of what constitutes 'total firm assets' and disclose the benchmark descriptions used for performance comparison.

CFA Institute does not endorse or promote this organization, nor does it warrant the accuracy or quality of the content contained herein.

• Firms must provide comprehensive transparency regarding fee structures, including model fees, performance-based fees, and carried interest descriptions.
• The standards mandate the disclosure of historical use of leverage, derivatives, and short positions to help investors assess risk.
• Significant events, fund redefinitions, and changes to investment mandates must be disclosed for at least one year to ensure track record integrity.
• Firms are required to disclose any conflicts between GIPS standards and local laws or regulations that impact performance reporting.
• The reporting must specify the methodology for calculating net returns, including the treatment of withholding taxes and specific share classes used.

If the gips pooled fund report conforms with laws and/or regulations that conflict with the requirements of the GIPS standards, the firm must disclose this fact and disclose the manner in which the laws and/or regulations conflict with the GIPS standards.

• Firms must disclose any periods of non-compliance with GIPS standards and any redefinitions of the firm's structure.
• Significant changes to a pooled fund's investment mandate, strategy, or name must be documented and disclosed for at least one year.
• The standards require transparency regarding whether fund and benchmark returns are reported gross or net of withholding taxes.
• Firms must explicitly disclose conflicts between GIPS requirements and local laws or regulations.
• Specific disclosures are required for the use of sub-advisors, valuation hierarchy deviations, and the absence or change of benchmarks.

If the gips pooled fund report conforms with laws and/or regulations that conflict with the requirements of the GIPS standards, the firm must disclose this fact and disclose the manner in which the laws and/or regulations conflict with the GIPS standards.

• Firms must provide detailed disclosures for any benchmark changes, including descriptions of the change and the specific dates for both prospective and retroactive adjustments.
• Specific transparency requirements are mandated for custom benchmarks, including the disclosure of components, weights, rebalancing processes, and calculation methodologies.
• The use of subscription lines of credit requires disclosure of their purpose, the total size of the credit line, and the outstanding balance as of the most recent annual period.
• Firms are required to disclose the correction of material errors for at least one year to ensure investors can accurately interpret the fund's track record.
• Theoretical performance included as supplemental information must be clearly labeled as such and accompanied by a description of the underlying methodology and assumptions.

The firm must disclose any change to the gips pooled fund report resulting from the correction of a material error.

• Firms must explicitly disclose if pooled fund performance results are theoretical and provide a description of the underlying methodology and assumptions.
• Theoretical performance disclosures must clarify whether investment management fees and transaction costs have been deducted from the results.
• The standards recommend disclosing material changes to valuation and calculation policies to maintain transparency with prospective investors.
• The GIPS Advertising Guidelines apply to firms that already satisfy compliance on a firm-wide basis and are distributing materials to more than one party.
• Advertisements are defined as materials where there is no direct contact between the firm and the reader, excluding one-on-one presentations.

The GIPS Advertising Guidelines do not replace the GIPS standards, nor do they absolve firms from presenting gips composite reports and gips pooled fund reports as required by the GIPS standards.

• The GIPS Advertising Guidelines apply to materials distributed to multiple parties where no direct contact exists between the firm and the reader.
• Firms must prioritize local laws and regulations if they conflict with GIPS requirements, though they are encouraged to seek legal counsel for additional disclosures.
• Supplemental information is permitted in advertisements as long as it does not conflict with GIPS standards and is presented with equal or lesser prominence.
• Specific technical restrictions apply to performance data, such as the prohibition of annualizing returns for periods of less than one year.
• Firms are strictly prohibited from linking non-compliant performance to GIPS-compliant performance for periods occurring after the minimum effective compliance date.

In cases where applicable laws or regulations conflict with the requirements of the GIPS standards or the GIPS Advertising Guidelines, firms are required to comply with the laws or regulations.

• Firms must strictly separate GIPS-compliant performance from non-compliant data for periods after the minimum effective compliance date.
• Composite and pooled fund returns in advertisements must be derived directly from their corresponding official GIPS reports to ensure data integrity.
• Advertisements are required to include specific trademark disclosures and instructions on how to obtain full GIPS-compliant performance information.
• Supplemental information beyond GIPS requirements must be presented with equal or lesser prominence to avoid overshadowing mandated disclosures.
• Performance reporting for composites must follow specific timeframes, such as one-, three-, and five-year annualized returns through the most recent period.

Other information beyond what is required or recommended under the GIPS Advertising Guidelines... must be presented with equal or lesser prominence relative to the information required or recommended by the GIPS Advertising Guidelines.

• Firms must present composite total returns using specific time-weighted or money-weighted return formats depending on the corresponding GIPS report.
• Mandatory disclosures include the reporting currency, a specific GIPS compliance statement, and instructions on how to obtain the full composite report.
• Benchmark returns must be presented for the same periods and return types as the composite returns to ensure direct comparability.
• Firms are required to disclose any conflicts between GIPS standards and local laws or regulations that affect the advertisement's content.
• Recommendations for advertisements include providing descriptions of the composite, the benchmark, and the historical use of leverage or derivatives.

CFA Institute does not endorse or promote this organization, nor does it warrant the accuracy or quality of the content contained herein.

• Firms must provide clear composite and benchmark descriptions, including the historical use of leverage and derivatives if they are material to performance.
• Advertisements for limited distribution pooled funds must present specific time-weighted or money-weighted return periods to ensure consistency with official GIPS reports.
• All performance data in advertisements must be clearly labeled as gross or net of fees and presented in the same currency as the benchmark.
• Firms are required to include a specific compliance statement and a disclaimer noting that the CFA Institute does not warrant the accuracy of the content.
• If local laws or regulations conflict with GIPS standards, the firm must disclose the nature of this conflict within the advertisement.

CFA Institute does not endorse or promote this organization, nor does it warrant the accuracy or quality of the content contained herein.

• Firms must provide clear instructions on how to obtain a full GIPS report and disclose any conflicts between GIPS standards and local laws.
• For limited distribution pooled funds, firms are encouraged to disclose the use of leverage, derivatives, and short positions if they are material to performance.
• Broad distribution pooled funds must adhere to specific return calculation methodologies, prioritizing legally mandated periods or standardized one-, three-, and five-year intervals.
• Advertisements targeting specific share classes must ensure that net returns accurately reflect the unique fees and expenses associated with that specific class.
• If no appropriate benchmark exists for a pooled fund, the firm is required to provide a formal explanation for its absence in the advertisement.

The firm must disclose if the gips advertisement conforms with laws or regulations that conflict with the requirements or recommendations of the GIPS standards.

• Firms must present annualized returns for one-, three-, and five-year periods, or since inception if the fund is newer.
• Net returns must reflect the specific fees of the advertised share class or the maximum fee available for general distribution.
• Advertisements are required to disclose the current expense ratio, reporting currency, and a clear description of the pooled fund.
• Firms must include a standardized compliance statement and a disclaimer noting that the CFA Institute does not warrant the accuracy of the content.
• In cases of regulatory conflict, firms must disclose the specific manner in which local laws differ from GIPS requirements.

CFA Institute does not endorse or promote this organization, nor does it warrant the accuracy or quality of the content contained herein.

• Firms must explicitly disclose any conflicts between GIPS standards and local laws or regulations in their advertisements.
• Broad distribution pooled fund advertisements are encouraged to disclose sales charges, loads, and the specific definition of the firm.
• The glossary defines accrual accounting as recording income when earned and expenses when incurred rather than when cash changes hands.
• Investment fees are categorized into various types, including all-in fees, bundled fees, and administrative fees like custody or auditing.
• Real estate performance is measured through capital return, which tracks value changes adjusted for expenditures and sales proceeds.

The firm must disclose if the gips advertisement conforms with laws or regulations that conflict with the requirements or recommendations of the GIPS standards.

• The text defines critical financial terms for real estate and private equity, including capital return and carried interest.
• It outlines the structural requirements for composites, which aggregate portfolios with similar investment mandates or strategies.
• Specific disclosure rules are established for composite descriptions, requiring firms to include material risks and the use of leverage or derivatives.
• Operational milestones such as the crystallization schedule and composite inception date are defined to ensure standardized performance reporting.
• The concept of a clawback is introduced as a mechanism for investors to reclaim performance fees if subsequent underperformance occurs.

The repayment of previously earned performance-based fees resulting from subsequent underperformance.

• The text defines critical financial milestones such as the crystallization schedule, which marks when a firm is officially entitled to performance-based fees.
• Custody fees are categorized as administrative costs and must include transaction-based charges rather than grouping them with general transaction costs.
• A distinct business entity is defined by its organizational segregation and its autonomy over the investment decision-making process.
• Fair value is established as the price in an arm's-length transaction, prioritizing objective market prices over internal estimates whenever possible.
• The distinction between ex ante and ex post perspectives highlights the difference between theoretical projections and historical performance results.

Fair value must represent the firm’s best estimate of the fair value.

• The glossary defines the roles of general and limited partners within the legal structure of limited partnerships.
• Specific reporting requirements are outlined for GIPS composite and pooled fund reports to ensure standardized transparency.
• Performance metrics such as high watermarks and hurdle rates are established to determine when firms can earn performance-based fees.
• The text details technical calculation methods for internal dispersion and the handling of large cash flows to prevent return distortion.

The high watermark is the return or value that a pooled fund or segregated account must exceed for the firm to be entitled to earn a performance-based fee.

• The text defines the legal and operational structures of investment vehicles, specifically distinguishing between limited partnerships and open-end funds.
• It provides the geometric formula for linking sub-period returns to calculate total period performance accurately.
• Specific compliance dates are established for different asset classes, with real estate and private equity requiring GIPS compliance from 2006 onwards.
• The standards mandate rigorous disclosure for performance-based fees, including details on hurdle rates, clawbacks, and high watermarks.
• Overlay strategies are defined as specialized management techniques used to adjust risk exposure or execute tactical market views separately from the underlying portfolio.

It must include enough information to allow a prospective client or prospective investor to understand the key characteristics of the performance-based fee.

• The text defines essential components of performance-based fees, including hurdle rates, clawbacks, and high watermarks.
• A performance examination is an independent verification process used to test specific composites or pooled funds against GIPS standards.
• Pooled fund descriptions must disclose material risks, including the use of leverage, derivatives, and illiquid investments.
• The inception date for a limited distribution pooled fund can be triggered by fee charges, capital calls, or the first investment-related cash flow.
• Private market investments are categorized as illiquid assets that are not publicly traded, such as real estate, infrastructure, and private equity.

The pooled fund description must include enough information to allow a prospective investor to understand the key characteristics of the pooled fund’s investment mandate, objective, or strategy.

• The text defines various investment vehicles, distinguishing between primary funds that invest directly and private market investments which remain illiquid and non-public.
• Prospective clients and investors are broadly defined to include current clients exploring new strategies as well as third-party consultants representing qualified entities.
• Performance metrics for private equity and pooled funds are established through terms like realization multiples (DPI) and residual value multiples (RVPI).
• The Public Market Equivalent (PME) provides a specialized benchmark by applying public index performance to the specific cash flow timing of a private fund.
• A critical distinction is made between 'requirements,' which are mandatory actions, and 'recommendations' or 'shoulds,' which represent non-obligatory best practices.

A PME can be used as a benchmark by comparing the MWR of a composite or pooled fund with the PME of a public market index.

• The text defines the distinction between 'require' and 'should,' where the latter indicates recommended best practices rather than mandatory actions.
• Side pockets are explained as specialized accounts used in alternative investments to isolate illiquid or distressed assets from the main liquid portfolio.
• Significant cash flows are defined by specific monetary or percentage thresholds that allow firms to temporarily adjust for external impacts on strategy implementation.
• Standard deviation is utilized as a dual-purpose metric, measuring both internal dispersion within a composite and historical risk over time.
• The glossary introduces the concept of temporary new accounts as a mechanism to mitigate the performance distortion caused by large client-directed cash flows.

Side pockets are typically not available for investing for new pooled fund investors that invest after the side pocket was created.

• Temporary new accounts are utilized to isolate the impact of significant external cash flows from a portfolio's core strategy performance.
• Theoretical performance encompasses any data not derived from actual assets, including backtested, simulated, and forward-looking models.
• Trade date accounting requires recognizing assets within three business days of a transaction to satisfy GIPS standards.
• Transaction costs for private market investments include legal and advisory fees but specifically exclude costs associated with dead deals.
• Wrap fees represent bundled charges for investment management that often include inseparable transaction and administrative costs.

Theoretical performance includes model, backtested, hypothetical, simulated, indicative, ex ante, and forward-looking performance.

• A wrap fee is defined as a bundled, asset-based fee that covers investment management, transaction costs, and administrative services.
• The Large Cap Growth Composite report provides a decade of performance data, including gross and net returns compared against a benchmark.
• Independent verification of GIPS compliance ensures a firm's policies for composite maintenance and performance distribution are properly implemented.
• The report highlights historical changes to the composite, such as an acquisition in 2014 and shifts in account minimum requirements over time.

Verification provides assurance on whether the firm’s policies and procedures related to composite and pooled fund maintenance, as well as the calculation, presentation, and distribution of performance, have been designed in compliance with the GIPS standards and have been implemented on a firm-wide basis.

• The report details the performance of a Large Cap Growth composite, including historical links to performance earned at a previous firm.
• Fee structures are meticulously outlined, distinguishing between gross-of-fees returns and net-of-fees returns calculated using a model management fee.
• Specific criteria for composite inclusion are defined, such as a $5 million account minimum and the removal of portfolios experiencing significant cash flows over 25%.
• The document transitions into a second sample showing money-weighted returns for a Global Absolute Return Composite reported in Euros.

Effective November 1, 2011, portfolios are removed from the composite if they have a significant cash flow.

• Able Management Company claims compliance with GIPS standards for its Global Absolute Return Composite, though it has not been independently verified.
• The strategy employs a global macro approach targeting deep-value equity and fixed-income securities, including non-investment-grade bonds.
• A custom benchmark is utilized based on a modified public market equivalent (PME) of the XYZ Global Macro Index to avoid negative NAV limitations.
• The composite utilizes a sub-advisor for all equity investments and incorporates currency forwards for both hedging and alpha generation.
• Performance reporting transitioned from quarterly to daily cash flow recording for money-weighted return calculations as of January 2020.

We look for value among beaten-down equity and fixed-income securities, including both investment-grade and non-investment-grade bonds, and may use currency forwards to add value or for hedging purposes.

• Able Management Company transitioned from time-weighted returns to money-weighted returns in 2020 to better reflect the firm's control over cash flow timing.
• A significant error correction was disclosed where a miscalculated cash distribution led to a 1% reduction in reported annualized returns.
• ABC Investments redefined its firm structure in 2016 to integrate wrap accounts with institutional accounts for performance reporting.
• The provided Small Cap Value Wrap Composite data illustrates a decade of performance, including gross and net returns alongside internal dispersion metrics.
• Compliance with GIPS standards requires specific disclosures regarding valuation policies, fee structures, and independent verification status.

The since-inception annualized gross and net composite returns have been restated from 8.4% and 7.9% to 7.4% and 6.9%, respectively.

• ABC Investments claims strict compliance with Global Investment Performance Standards (GIPS) and has undergone independent verification for over two decades.
• The Small Cap Value Wrap Composite was redefined in 2016 to transition from institutional accounts to exclusively wrap fee accounts.
• The composite targets US equities with market capitalizations between $500 million and $2 billion, noting that these stocks historically exhibit higher volatility.
• Performance reporting utilizes the XYZ Small Cap Value Index as a benchmark, which tracks 800 low price-to-book ratio companies.
• Return calculations shifted in 2016 from using actual trading costs to a model transaction cost of $0.05 per share based on institutional averages.

Historically, small-cap stocks have been more volatile than large-cap stocks.

• The text details the transition from using actual trading costs to a model transaction cost of $0.05 per share for gross return calculations.
• Net returns are derived by deducting a standard 3.00% annual wrap fee, which encompasses management, custody, and administrative costs.
• Advisory-only assets are categorized as supplemental information because the firm lacks direct control over the implementation of investment decisions.
• The Passive Currency Overlay Composite performance data illustrates a strategy designed to hedge underlying portfolios to the Swiss franc.
• Internal dispersion and three-year annualized standard deviation are utilized to measure the variability and risk of the composite returns.

Effective January 1, 2016, the gross return is calculated by applying a model transaction cost of $0.05 per share to each trade.

• The report details the performance of Tumble Management Limited, a firm specializing in currency overlay portfolios for institutional clients.
• Performance data from 2016 to 2020 shows a significant downturn, with negative annualized returns since the composite's inception.
• The firm utilizes a 'contribution from hedges' methodology, calculating performance based on marked-to-market changes relative to underlying portfolio values.
• The strategy relies heavily on forward currency contracts for leverage, making it highly sensitive to liquidity and currency correlations during volatile periods.
• Compliance with GIPS standards is verified independently, though the report notes that verification does not guarantee the accuracy of specific performance figures.

In volatile periods, liquidity and correlations between currencies may influence returns significantly.

• The report outlines specific methodologies for custom benchmarks, including monthly rebalancing and detailed component weightings available upon request.
• Investment management fees are tiered based on notional value, with a standard rate of 0.10% up to CHF 300 million and 0.05% for larger amounts.
• Internal composite dispersion is calculated using equal-weighted standard deviation, but is omitted when a composite contains five or fewer portfolios.
• The sample data illustrates the performance of carve-outs with allocated cash, comparing gross and net returns against a high-yield bond benchmark over a ten-year period.

CFA Institute does not endorse or promote this organization, nor does it warrant the accuracy or quality of the content contained herein.

• Crater Capital presents a performance report for its High Yield Bond Composite covering the period from 2017 to 2020, claiming compliance with GIPS standards.
• The firm underwent independent verification from 2008 to 2019 to ensure its policies for composite maintenance and performance distribution meet global standards.
• The strategy focuses on high-risk fixed-income securities rated BB or lower, with a primary objective of generating high current income for investors.
• The composite includes carve-outs where cash is allocated monthly based on the relative value of the high-yield segment to the total portfolio.
• Performance is benchmarked against the XYZ US High Yield Corporate Bond Index, which tracks dollar-denominated bonds from specific geographic regions.

High-yield bonds carry increased levels of credit and default risk and are less liquid than government and investment-grade corporate bonds.

• The text details the methodology for calculating composite returns, including the deduction of management fees and the reinvestment of earnings.
• A tiered fee schedule is outlined, showing decreasing percentage costs as the total value of assets under management increases.
• Internal dispersion and three-year annualized ex post standard deviation are used to measure the variability and risk of the composite returns.
• A sample GIPS report for the Japan Large Cap Equity Fund illustrates a decade of performance data, including gross and net returns compared to a benchmark.
• Verification of GIPS compliance ensures that a firm has established rigorous policies and procedures for performance presentation.

CFA Institute does not endorse or promote this organization, nor does it warrant the accuracy or quality of the content contained herein.

• Pudoru Investments claims compliance with Global Investment Performance Standards (GIPS) for its Japan-based equity management services.
• The Japan Large Cap Equity Fund focuses on long-term capital appreciation, maintaining at least 80% of assets in Japanese common and preferred stocks.
• The report highlights specific demographic risks, noting that Japan's aging population and potential tax increases for healthcare could stifle economic growth.
• Performance data is reported in Japanese yen, with gross returns calculated before management fees but after trading and administrative expenses.
• The fund underwent a leadership transition in January 2019 when portfolio manager Koh Yuwabara retired and was succeeded by Yuna Tanaka.

Japan’s population is aging, and the government may have to increase taxes as it spends more on healthcare, which could slow economic growth at a time when Japan has been in a prolonged economic downturn.

• Linker Advisors presents a performance report for the Juneau Private Placements Bond Fund in compliance with Global Investment Performance Standards (GIPS).
• The fund focuses on illiquid, investment-grade, long-term private placement bonds that are highly sensitive to interest rate fluctuations.
• Financial data from 2014 to 2020 shows fund assets growing from C$250 million to C$404 million while consistently tracking or exceeding the XYZ Canadian Long Duration Fixed Income Index.
• The fee structure includes a 0.40% annual management fee plus a 20% performance fee on returns exceeding the benchmark, crystallizing annually.
• The report notes a significant leadership transition in January 2019 when portfolio manager Koh Yuwabara retired and was succeeded by Yuna Tanaka.

Private placement bonds are illiquid investments and have restrictions on transferability.

• The CMCA Core Commercial Real Estate Fund utilizes a fee structure consisting of a 0.40% management fee and a 20% performance fee on excess returns.
• A detailed performance table tracks gross and net returns alongside benchmark data for the fund from 2012 through 2020.
• Independent verification of GIPS compliance confirms that firm-wide policies for performance calculation and presentation meet global standards.
• Verification provides assurance on the design and implementation of firm policies but does not guarantee the accuracy of specific performance reports.
• The fund focuses on Class A commercial properties in the US and Canada, including office, retail, industrial, and multi-family sectors.

Verification does not provide assurance on the accuracy of any specific performance report.

• The Core Commercial Real Estate Fund focuses on Class A properties in the US and Canada, including office, retail, industrial, and luxury multi-family sectors.
• Key investment risks identified include interest rate fluctuations, liquidity constraints in selling physical assets, and sensitivity to economic downturns.
• The fund utilizes a moderate leverage strategy of 15% to 30%, which serves to magnify both potential gains and losses for investors.
• Valuations are conducted quarterly using internal projections of cash flows and market discount rates, with external valuations performed annually.
• Performance is measured against the XYZ National Core Commercial Property Index, which maintains an equal 25% weighting across four major property types.

Therefore, it may take longer to sell a property, and property values could move down before we have the chance to realize any unrealized gains.

• The report provides a standardized performance presentation for the Armor Distressed Debt Fund, utilizing money-weighted returns to account for capital calls and distributions.
• A significant portion of the fund's assets, specifically 25%, is valued internally using proprietary pricing models due to a lack of market activity for those specific distressed bonds.
• The presentation distinguishes between returns with and without the use of a subscription line of credit, showing how leverage impacts the fund's net performance figures.
• Armor Management claims compliance with GIPS standards and has undergone independent verification to ensure their policies for performance calculation and distribution are properly implemented.
• The fund's strategy involves high-risk investments in euro-denominated bonds rated CCC or lower, making it sensitive to European Central Bank policy and corporate defaults.

There is no market activity to support valuation for these investments; therefore, valuations are based on the firm’s proprietary pricing model using the Euro XYZ Index Swaps yield curve and credit spreads.

• The Armor Distressed Debt Fund utilizes a custom benchmark based on the XYZ Eurozone Distressed Debt Bond Index for performance comparison.
• Fund returns are reported net of all fees, including transaction costs, administrative fees, and management fees.
• The use of a subscription line of credit (LOC) can significantly magnify money-weighted returns by delaying capital calls from limited partners.
• GIPS compliance requires specific disclosures regarding valuation policies, fee schedules, and the impact of leverage on performance metrics.
• Sample advertisements demonstrate how firms must claim compliance with GIPS standards while providing contact information for full performance data.

This generally will magnify gains or losses in money-weighted returns.

• Feppy Investments provides a sample advertisement for its Mid Cap Growth Composite, showcasing annualized total returns against a benchmark index.
• The firm utilizes a bottom-up security selection approach based on the belief that equity markets are inefficient and alpha can be added through research.
• Bella Management Company presents a different reporting style for its CLO Senior Loan Fund, utilizing money-weighted returns (MWR) instead of time-weighted returns.
• Both advertisements include mandatory GIPS compliance claims and disclaimers stating that CFA Institute does not warrant the accuracy of the content.
• The documents highlight the transition of firm definitions, such as Feppy Investments expanding to include wrap accounts in its 2016 redefinition.

The management team believes that equity markets are inefficient and that a bottom-up security selection approach can add alpha.

• The text provides standardized templates for investment firms to advertise pooled funds while complying with Global Investment Performance Standards (GIPS).
• Bella Management Company illustrates a CLO Senior Loan Fund that utilizes money-weighted returns and specific inception dates based on capital calls.
• Ipne Investments presents a Global Bond Fund fact sheet detailing asset allocation, turnover rates, and specific risk measures like the Sharpe ratio.
• The Global Bond Fund strategy emphasizes flexibility, allowing for tactical allocation across sectors and the use of derivatives for long or short exposure.
• Both samples highlight the necessity of disclosing management fees, expense ratios, and benchmark comparisons to ensure transparency for potential investors.

The Fund is non-diversified, which means that it can invest a greater percentage of its assets in the securities of fewer issuers than can a diversified fund.

• Ipne Investments presents a decade of performance data for its global bond fund, claiming compliance with Global Investment Performance Standards (GIPS).
• The fund utilizes a combination of fundamental and quantitative analyses to select securities with optimal relative value against the XYZ Global Bond Index.
• Risk metrics reveal a Sharpe ratio of 0.20 and an annualized standard deviation of 2.88, indicating the fund's historical risk-return efficiency and volatility.
• The disclosure outlines critical investment risks, including active management failure, credit defaults, currency volatility, and the leverage risks associated with derivatives.
• Performance data shows the fund closely tracks its benchmark over the long term, with a 3.05% return since inception compared to the benchmark's 3.02%.

Derivatives involve costs and can create economic leverage in the Fund’s portfolio, which may result in significant volatility and cause the Fund to participate in losses (as well as gains) in an amount that significantly exceeds the Fund’s initial investment.

• Derivative instruments can create economic leverage that leads to losses significantly exceeding the initial investment.
• Emerging market investments face heightened risks due to a lack of established legal, political, and social frameworks.
• High-yield debt securities, or junk bonds, are more vulnerable to economic recessions and suffer from higher illiquidity.
• Sovereign debt defaults may leave investors with no legal remedies or bankruptcy proceedings to recover unpaid principal.
• Composite descriptions define specific investment strategies, such as US Large Cap Equity Growth and US Balanced Growth.

In the event of default, there may be limited or no legal remedies for collecting sovereign debt and there may be no bankruptcy proceedings through which the Fund may collect all or part of the sovereign debt that a governmental entity has not repaid.

• The US Large Cap Equity Growth Composite targets companies with superior earnings prospects while maintaining a tracking error under 4%.
• The US Balanced Growth strategy maintains a typical equity allocation of 55% to 65% to provide both capital growth and steady income.
• Unconstrained Activist UK Equity portfolios are highly concentrated with approximately 15 securities, leading to significant stock-specific risk.
• Activist strategies may utilize OTC derivative contracts for portfolio management, introducing potential counterparty default risk.
• The UK Liquidity Plus Composite prioritizes capital preservation and liquidity through short-dated instruments with a duration under one year.

In times of increased market volatility, the composite characteristics may change significantly, and stock liquidity could be reduced.

• The UK Liquidity Plus strategy prioritizes capital preservation and liquidity while seeking higher yields through short-term commercial paper.
• Emerging Market High Yield funds target total returns from non-OECD debt but face heightened political, economic, and counterparty default risks.
• Socially Responsible Investments (SRI) focus on companies meeting proprietary sustainability thresholds, potentially leading to higher portfolio concentration.
• Leveraged Bond strategies utilize a mix of domestic and international fixed-income securities to maximize total returns despite interest rate volatility.

The SRI process tends to screen out certain companies and sectors, which may result in a more concentrated strategy than a fully diversified strategy.

• The Leveraged Bond Composite seeks high income through corporate and government bonds while allowing leverage up to twice the portfolio's value.
• The Global Commodity Equity Composite invests primarily in common stocks of energy and materials companies, with limited direct exposure to raw materials.
• Commodity-based strategies face unique volatility risks driven by legislative changes, national policies, and shifting consumer behaviors.
• The Currency Overlay Composite focuses on active alpha generation through exchange rate movements, particularly in volatile emerging markets.
• Derivative instruments across these composites introduce significant counterparty default risk and potential magnification of losses.

Leverage may also magnify losses as well as gains to the extent that leverage is used.

• Global and emerging market portfolios face significant risks from macroeconomic policy shifts, political instability, and currency volatility.
• The Tactical Asset Allocation Overlay strategy utilizes high leverage up to 180% and derivatives to profit from asset class exposure shifts.
• Covered call writing strategies aim to generate monthly income and downside protection but remain susceptible to disproportionate price movements in derivatives.
• The Asian Market Neutral strategy employs a quantitative long/short approach to outperform Treasury Bills while maintaining high exposure in both directions.
• Counterparty default risk is a persistent concern across all strategies involving over-the-counter derivatives and forward contracts.

A leveraged account may result in large fluctuations in value and entails a high degree of risk, including the possibility of substantial losses.

• The Asian Market Neutral strategy utilizes a high-conviction approach by investing at least 85% of net asset value in both long and short equity positions.
• The Value-Added Asian Real Estate strategy focuses on income and capital appreciation by targeting properties requiring operational or financial correction.
• Leveraged US Direct Lending targets middle-market companies with high EBITDA, utilizing significant leverage up to 150% to enhance returns.
• These active strategies carry inherent risks including counterparty default on derivatives, illiquidity in real estate, and magnified losses from leverage.
• The US Core Equity Composite represents a terminated strategy that focused on large-capitalization stocks using a growth at a reasonable price (GARP) approach.

Leverage may magnify losses as well as gains to the extent that it is used.

• Directly originated loan strategies target private equity-backed companies with $10 million to $150 million of EBITDA to generate higher income than syndicated markets.
• The US Core Equity Composite utilized a quantitative and fundamental GARP strategy for large-cap stocks before its termination in March 2018.
• The Stable Growth 2022 Fund is a medium-to-low risk product focused on Chinese domestic debt instruments with a strict lock-up period until year-end 2022.
• Investment vehicles like the Stable Growth 2022 Fund may engage in related-party transactions by investing in asset management plans managed by the parent company.
• Leverage in direct lending strategies is used to magnify returns but also increases liquidity risk and potential losses.

The Fund may invest in other SAMPs under management by our firm or by our parent company, ABC Fund House, with possible related-party transactions involved.

• The SAMP fund utilizes flexible asset allocation ranging from 0% to 100% and benchmarks against a specific deposit rate plus net interest income.
• The Contrarian Core Trust Fund focuses on undervalued, out-of-favor stocks to achieve long-term capital appreciation and current income.
• At least 80% of the Contrarian Core Trust Fund's assets are dedicated to large-cap US companies, with a secondary allowance for foreign securities.
• Foreign investments within these funds carry unique risks including currency fluctuations, political instability, and limited market information.
• The primary risks identified for these investment vehicles include interest rate volatility, sector concentration, and active management risk.

To achieve this objective, the investment team strives to capitalize on out-of-favor stocks that the market has undervalued.

• The Contrarian Core Trust Fund focuses on undervalued large-cap US stocks using a blend of quantitative and fundamental research.
• The Global Liquidity Relative Value Fund employs long and short positions in government and mortgage-backed securities across developed and emerging markets.
• Derivatives are utilized by the Global Liquidity Fund to time market moves, manage interest rate exposure, and create asymmetrical risk-return profiles.
• The Global Liquidity Fund operates with significant leverage, typically ranging from 10 to 12 times its net asset value.
• Both funds face distinct risks, ranging from currency fluctuations and political instability to the potential for substantial losses from high leverage.

The Fund is generally levered in the range of 10 to 12 times.

• The Global Liquidity Relative Value Fund employs a high-leverage strategy, typically ranging from 10 to 12 times its net asset value.
• Derivatives are utilized by the Liquidity Fund to manage interest rate exposure and create asymmetrical risk-return profiles during volatile periods.
• The European Real Estate Fund focuses on stable cash-flow properties like industrial and office spaces with a much lower leverage cap of 60%.
• Real estate investments face significant liquidity risks, meaning investor withdrawals may be delayed due to the nature of the underlying assets.
• Both funds acknowledge that the use of leverage and derivatives can lead to substantial losses and heightened value fluctuations.

The Fund is generally levered in the range of 10 to 12 times.

• The European Real Estate Fund targets stable cash flow and long-term growth through low-leveraged industrial, retail, and office properties.
• The European Private Equity Fund focuses on small- and mid-cap buyouts with a long-term investment horizon of 7 to 10 years.
• Private equity returns are expected to follow a J-curve, where initial fund values typically fall below booking value before generating profit.
• The Insurance-Linked Securities (ILS) Fund offers returns uncorrelated with capital market risks by investing in catastrophe bonds and reinsurance.
• The Short Duration Fund acts as a private placement vehicle aimed at preserving capital through government-guaranteed fixed-income securities.

Because of the nature of ILS investments, they are uncorrelated with the typical capital market risks.

• The Short Duration Fund focuses on capital preservation through US government-backed securities while allowing for limited exposure to non-investment-grade debt.
• The 2018 Venture Capital Fund targets early-stage technology companies in international markets, specifically mandating a 10% minimum allocation to Chinese high-tech.
• The 2016 Buyout Strategy Fund of Funds emphasizes operational improvements and cost reduction over financial engineering within its underlying partnerships.
• Leveraged buyout funds in the portfolio may utilize 100% to 300% leverage, creating the potential for significant value fluctuations and substantial losses.
• Insurance-Linked Securities (ILS) provide a unique diversification benefit as they remain uncorrelated with typical capital market risks.

Managers of partnerships are expected to focus on reducing costs, preparing companies for downturn, and providing operational improvement rather than financial engineering.

• Private equity partnerships utilize high leverage of 100% to 300% to diversify across industries and vintage years while managing illiquidity risks.
• The Value-Added Real Estate Fund targets properties in major US markets with higher operational risk, aiming for both income and appreciation.
• Real estate and private equity investments face significant liquidity constraints that can lead to extended fund lives and delayed capital distributions.
• The US Fixed Income Fund focuses on investment-grade debt securities but remains vulnerable to interest rate fluctuations and credit defaults.
• Broad distribution pooled funds are categorized into various types including High Yield, Municipal, and Quantitative Core funds to meet different investor needs.

A leveraged fund may result in large fluctuations in value and entails a high degree of risk, including the possibility of substantial losses.

• The Bond Fund focuses on mortgage-backed securities and debt, primarily facing interest rate and credit risks.
• The Global Equity Market Neutral Fund utilizes long and short positions to minimize macroeconomic exposure while managing valuation gaps.
• The Global Absolute Return Fund employs active currency strategies and derivatives to maintain low correlation with traditional asset classes.
• Leverage and short selling are highlighted as high-risk techniques that can lead to magnified fluctuations or theoretically unlimited losses.
• Counterparty risk is a critical factor for funds using derivatives, representing the danger of a contract partner failing to meet obligations.

Short selling risk is the risk that securities sold short (borrowed) may rise significantly in price, resulting in unlimited losses when purchased to close the position in the security.

• The US Small Cap Equity Fund targets long-term growth by investing at least 80% of its assets in companies with market capitalizations under $2 billion.
• Small-cap investments face heightened volatility and liquidity risks, potentially leading to the suspension of share redemptions during difficult market conditions.
• The Global Credit Income Fund utilizes a bottom-up approach to invest in a mix of investment-grade and high-yield bonds across global markets.
• Leverage in these funds is capped at 200% of total net assets but introduces the risk of substantial losses and large fluctuations in fund value.
• The Diversified Equity Fund seeks absolute returns above the UK inflation rate by investing across a broad spectrum of asset classes including infrastructure and commodities.

Short selling risk is the risk that securities sold short (borrowed) may rise significantly in price, resulting in unlimited losses when purchased to close the position in the security.

• The Absolute Return Fund seeks to outperform UK inflation over a five-year cycle while maintaining lower risk than global equity markets.
• Diversification across infrastructure and property introduces specific liquidity risks due to the unlisted nature of these assets and low price discovery.
• The UK Gilt Fund targets long-term capital growth through government securities with a specific portfolio-weighted duration of three to six years.
• Both funds utilize derivatives for hedging and efficiency, which can lead to leverage levels reaching up to 300% of total net assets.
• Specific risks for Asian High Yield investments include political, legal, and counterparty vulnerabilities inherent in emerging market sectors.

Use of derivatives will result in the Fund being leveraged, where the potential for losses exceeds the amount invested.

• The UK government securities fund utilizes derivatives and leverage up to 200% of total net assets to achieve long-term capital growth.
• The Asian High Yield Fund targets sub-investment grade securities and may allocate up to 30% of assets to distressed or defaulted debt.
• The European Equity Fund employs a concentrated strategy of 40 to 50 high-quality companies to outperform its benchmark by up to 300 basis points.
• Liquidity risk is a recurring theme, particularly for funds dealing with Asian markets or European securities undergoing corporate actions.
• Investment strategies across these funds combine top-down macroeconomic analysis with bottom-up fundamental security selection.

As a result of liquidity risk, the Fund may have a loss when it sells securities to raise cash for redemption requests by other shareholders.

• The European Equity Fund targets high-quality growth companies with a goal to outperform its benchmark by 250 to 300 basis points annually.
• The European Bond Fund focuses on investment-grade Eurozone securities, maintaining a portfolio-weighted average duration of three to five years.
• The World Allocation Fund operates as a 'fund of funds,' utilizing a proprietary quantitative model to manage a diversified global asset mix.
• Defensive strategies in the World Allocation Fund may lead to significant deviations from target allocations, potentially impacting the achievement of investment objectives.
• Specific risks across these funds range from illiquidity in equity markets to sovereign and counterparty risks in global allocations.

When market conditions dictate a more defensive strategy, the Fund or an underlying fund may temporarily hold cash or cash equivalents.