Performance Perspectives Blog

GIPS Policies & Procedures: what’s YOUR style?

by | Feb 7, 2018

When it comes to crafting your GIPS(R) Policies & Procedures, one of the first things you need to settle on is what your STYLE will be.

Recall that GIPS (Global Investment Performance Standards) requires written policies & procedures. This task is often felt to be one of the most difficult aspects of compliance.

Last year, The Spaulding Group launched a P&P Contest.  It has taken us longer than we anticipated to go through all of the entries, though we’re almost done. We will shortly announce the winner, as well as the two runners-up.

I want to acknowledge my colleague, John Simpson, CIPM, who referenced the style alternatives in a communication relative to the contest. I saw this as a blog opportunity, and thus we have this post!

What style to choose for your GIPS Policies & Procedures?

There are generally three styles to choose from when crafting your GIPS Policies & Procedures.

  1. Fill in the blanks. Some verifiers provide their clients with spreadsheet “templates,” with questions that cover what is needed or desired within the P&P. There is typically a single, overall tab, for general information, and separate tabs for each composite.
  2. Respond to the Standards. Some firms copy the provisions from the Standards, and embed within this text what they’re doing. For example, where there’s a statement that returns must be time-weighted, we’ll see an insertion “FIRM uses time-weighted returns.”
  3. Create a narrative. Here, the firm writes out, in sentence and paragraph form, what their policies and procedures are. They create sections covering the major areas, and discuss what they’re doing.

Pros and cons of each

Let’s briefly address some of the pros and cons of each of these approaches to GIPS Policies & Procedures:

  1. Fill in the blanks. This may seem to be a lot easier, since the firm need only answer questions. They’re being directed as to what is needed, which can make the job easier. That said, the need for multiple tabs for composites adds to the workload. In addition, finding specific rules can be a bit more difficult. I think it’s also difficult for someone who wants to understand what the rules are, since they have to find questions and read responses, rather than simply reading what the firm is doing. In other words, they’re difficult to just read in order to understand the rules.
  2. Respond to the Standards. This takes up a great deal of space, as a lot of provisions are being copied in. I’d argue that they’re not really P&P, but rather simply inserting text within a document. It can, again, be difficult to uncover what the rules actually are, as you have to dig through the Standards to find what you’re looking for. As with “Fill in the blanks,” they’re difficult to just read.
  3. Create a narrative. This is, no doubt, the most challenging style choice to craft policies. It forces people to write/document, which many find to be an onerous undertaking. It creates rules that are custom to the firm. It allows for the firm to discuss, at whatever length they feel is necessary, what they’re doing.  And, they’re easier to read.

What’s our preference?

As GIPS verifiers, we see them all. And, we’re comfortable working with all of these approaches.

My preference is the narrative. I think it’s easier to navigate and easier to maintain. This free-form archetype provides no limitations, no constraints, no boundaries. The firm can include items that wouldn’t be found within a spreadsheet template and the Standards.

As part of our firm’s proprietary GIPS Orientation Kit™, which we provide all of our GIPS verification clients, we include our own “template,” which is a series of questions, to help drive the firm to think about items they will need to include. We will shortly include new samples, which are often sought after to help the firm get a better grasp as to what is needed.

Everyone has their preferred style

Most folks make style decisions when it comes to their clothing. I still wear suspenders (actually, braces), even though they’re supposedly out of style. I typically have a pocket square in my suit or jacket pocket; most men do not. And while hats for men seem to be making a comeback, I’m not quite bold enough yet to wear one.

Well, you have a style choice when it comes to your GIPS Policies & Procedures, too. Choose wisely!

Back to the P&P Contest …

As noted above, we are almost done. The policies of the winner, and perhaps the runners-up, will appear in an upcoming issue of The Journal of Performance Measurement(R).


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