Performance Perspectives Blog

GIPS Pooled Funds Guidance Statement Released!

by | Apr 12, 2017

pooled funds

In September 2013, those of us who attended the annual GIPS(R) conference were provided with some rather scary news: that managers with pooled funds (e.g., mutual funds) would be required to provide all prospective fund shareholders with the composite presentation that the fund is in. In fact, it was suggested that since nowhere in the Standards do we find an exemption for shareholders, why would one not already be doing just this? That is, it is a belief of some that this is, in reality, a requirement today! In fact, not just a “belief,” but a “fact!”

This news created quite a stir, a great deal of angst, concern, worry, and along with that, a fair amount of disagreement. Fortunately, Jonathan Boersma, CFA of the CFA Institute, who is responsible for the Standards, tempered this news a bit and suggested that perhaps it might depend on who the prospective client was defined as. Exactly! We’d have to wait to see the actual document. Well, wait we did!

I was so concerned about this news that I shared it, along with my thoughts, in a blog post, as well as our newsletter.

Fast (no, rather slow) forward 3 1/2 years: GIPS Pooled Fund Guidance arrives!

It took awhile for the draft guidance to appear, which only caused further nervousness for many. There were folks from the U.S. Securities & Exchange Commission (SEC) at that conference, and to hear “oh, and if you’re not already doing this, you’re not compliant” might make them “stand up and take notice,” something some didn’t necessarily want to occur.

The draft guidance statement was not exactly as it was portrayed back in September 2013. The “requirement” to provide presentations was presented perhaps as an idea, but one worthy of discussion. Numerous comment letters were submitted, including one from The Spaulding Group.

I can only imagine that there was a great deal of discussion on this notion to require GIPS compliant managers to provide presentations to prospective fund shareholders. As an indication of this, consider the CFA Institute’s blog post stating that the “long awaited pooled fund guidance statement” was “nearing release.” This post (by Anju Grover, CIPM) appeared October 19, 2016! That’s quite a gestation period.

Okay, so does the GIPS Pooled Fund Guidance require presentations to be distributed?

An announcement appeared a few weeks ago that the guidance had been finalized. I found this to be a bit unusual, because the announcement normally comes with the document being presented; at least that’s my recollection. But we at least knew that it would shortly appear.

And appear, it did (and click here to be taken to it)! I recently read it and must say that the delay in finding the answer was a drawn-out one. We do not get that answer until page 9! But there we find the following:

pooled fund statement

It is NEITHER REQUIRED NOR RECOMMENDED to provide such information. That is one heck of a turnaround, is it not?

Is the GIPS Pooled Fund Guidance Statement even needed?

The document is actually 19 pages long, though the “meat” of the guidance is only nine. Did I write “only nine”?

Some question why this document is necessary. I found it quite surprising to learn almost four years ago that there was confusion on this topic; but of course I was of a different view completely from the speakers that day. A fund shareholder candidate is not the same as a prospect for the firm’s composites. That’s it. Simple.

The document goes beyond GIPS, offering ideas requirements for fund materials. One might argue, and some have, that this is not necessary or justified. I won’t comment. I’m just very pleased that the nightmare is over.

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