The Spaulding Group Presents

The Ultimate Guide to
The 2020 GIPSⓇ Standards - PART III


​2020 GIPS Standards’ Highlights

Resources:

Global Investment Performance Standards (GIPS®) for Firms 2020 1
Global Investment Performance Standards (GIPS®) for Asset Owners 2020 2
Global Investment Performance Standards (GIPS®) for Verifiers 2020 3
Global Investment Performance Standards (GIPS®) for Firms Adopting Release 4
Global Investment Performance Standards (GIPS®) for Asset Owners Adopting Release 5

This document provides a summary of most (but not all) of the changes.

​Additional Resources:

The Spaulding Group hosted three webinars 6 on the changes to the GIPS standards with the 2020 version. We addressed the changes for firms (asset managers), asset owners, and technology.

INTRODUCTION

Despite the Global Investment Performance Standards (GIPS®) having already had two revisions (in 2005 and 2010), the newest (2020), by far, has the greatest impact. It includes changes to:

  • ​Structure
  • ​Terminology
  • ​Rules.

The structure change has resulted in there being three separate “chapters” for:

  • ​Firms (i.e., asset managers)
  • ​Asset Owners
  • ​Verifiers.

​This guide provides details on the key changes, along with suggestions and commentary.

Important dates for compliance

The “effective date” for the 2020 changes is 1 January 2020. Firms are not required to comply until they begin to report the 31 December 2020 results, which essentially means 1 January 2021.

​A word (or two) on “early adoption” and adoption, in general

​Firms are permitted to adopt the Standards early (“early adoption”), meaning they adopt before the effective date. If they elect to do this, they cannot “pick and choose” what parts of the changes they want to adopt, but must adopt in full.

In reality, firms cannot pick and choose even after the effective date. When a firm decides to adopt the 2020 version (be it prior to or after 1 January 2020), they must adopt in full.

In saying this, there are exceptions. Firms can adopt some of the changes without adopting everything. For example, firms may elect to add the new “trademark” disclosure [see below for details] now, or prior to their adoption of the full block of changes. If the change is something that is allowed under the 2020 GIPS standards but not in the 2010 version, the firm cannot do it without fully adopting 2020 GIPS.

Here are examples of changes that cannot be adopted without adopting the entire block of changes:

  • ​Estimated transaction costs
  • ​Allocating cash for carve-outs
  • ​The new claim of compliance language
  • ​Removing pooled funds from composites because the fund’s strategy is not offered for separate accounts

Any change identified with a red asterisk below reflects ones that cannot be adopted without adopting the full set of changes.

This guide is divided into four major sections:

  • ​The GIPS Standards for Firms
  • ​The GIPS Standards for Asset Owners
  • ​The GIPS Standards for Verifiers
  • ​Suggested steps to move to compliance.

​You’ll notice that there is some redundancy across the “Firms” and “Asset Owners” section. The same occurs within these individual chapters. We expect that readers who are with asset managers will likely focus on the “Firms” section, while those from asset owners will look at that section. Thus, the redundancy is necessary.


​1    https://www.cfainstitute.org/en/ethics/codes/gips-standards/firms
2    https://www.cfainstitute.org/en/ethics/codes/gips-standards/asset-owners
3    https://www.cfainstitute.org/en/ethics/codes/gips-standards/verifiers
4    https://www.cfainstitute.org/-/media/documents/code/gips/adopting-release-firms.ashx
5    https://www.cfainstitute.org/-/media/documents/code/gips/adopting-release-asset-owners.ashx
6    https://spauldinggrp.com/gips-2020-webinars/

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Table of Contents


Chapter

1

​​The GIPS Standards for Firms

​MAJOR CHANGES FOR FIRMS (ASSET MANAGERS)

We’ve identified five of the changes to the Standards as being worthy of being classified as “major.” The many remaining changes may not be “major,” but are still important, and are delineated below.


Chapter

2

​​The GIPS Standards for Asset Owners

​We’ve identified three of the changes to the Standards as being worthy of being classified as “major.” The many remaining changes may not be “major,” but are still important, and are delineated below.


Chapter

3

​​The GIPS Standards for Verifiers

​Anyone who works with, complies with, or is thinking about complying with GIPS can benefit from reading the “chapter” GIPS Standards for Verifiers 2020. Verification is often an integral part of compliance, and the proposed changes to verification impact both verifiers and those they verify.


Chapter

4

​​Developing a Plan to Comply

​The changes being introduced with the 2020 version far surpass any other revision to the GIPS standards. While the effective date is 1 January 2020, firms and asset owners have until they begin to report their 31 December 2020 information, most likely in the first quarter of 2021.