Performance Perspectives Blog

Advisory assets & GIPS(R) firm assets

by | Aug 31, 2010

The Global Investment Performance Standards (GIPS(R)) requires firms to report their “firm assets” as part of each composite presentation. But many people have advisory accounts…should these assets be included?

First, what are advisory accounts? They’re essentially non-discretionary relationships (from a legal perspective) where the manager has no assurance that their investment decisions will be carried out. For example, perhaps you have a brokerage client that you alert to trades you plan to do, and suggest that they do the same. Or, you have a model which you’ve sold to a third party, who in turn markets to their clients. You can’t be assured or don’t know whether or not they take your advice, however.

These assets are not part of your “firm assets” and should not be included as such on your GIPS composite presentations. The basis for this position is shown in a table on page 67 of the 2006 edition of the GIPS handbook.

You can, of course, include a separate field if you wish, of “advisory assets,” but this would be considered “supplemental information” and would have to be annotated accordingly.