In the world of GIPS compliance and composite presentations, there is “supplemental information” and there is also “additional information”… but what is the difference?
When I explain these concepts to students in The Spaulding Group’s classes or to our verification clients, I tell them it is helpful to think of the following concepts:
- required information: any information that is required by the provisions of GIPS, or by any guidance statements, Q&As, the GIPS Handbook, gipsstandards.org, updates or clarifications from the GIPS Executive Committee, etc.
- recommended information: any information that is recommended by the provisions of GIPS, or by any guidance statements, Q&As, the GIPS Handbook, gipsstandards.org, updates or clarifications from the GIPS Executive Committee, etc.
- additional information: information that is required or recommended by the GIPS Standards
- supplemental information: Any performance-related information included as part of a compliant presentation that supplements or enhances the required and/or recommended provisions of the GIPS standards
For example, let’s say a firm is showing both gross-of-fees and net-of-fees returns in a compliant composite presentation. Can the firm label either the gross returns or the net returns as supplemental information?
The answer is no, gross return and net returns must not be labeled as supplemental information, because they are additional information. GIPS provision I.5.A.1.b requires firms to show either gross returns or net returns (whichever is shown must be clearly labeled as such). But because gross returns and net returns are covered by the requirements of GIPS (i.e., they are required information), they fall under the category of “additional information” and cannot be labeled as supplemental information. To do so could be interpreted by a reader of the composite presentation as de-emphasizing what is really a required presentation element. True, GIPS provision I.5.A.1.b allows the firm to show gross returns or net returns, but a firm showing both cannot de-emphasize one of the returns by labeling it as supplemental.
Note: supplemental information must be clearly labeled in a composite presentation. Normally, required information, recommended information and additional information would not be labeled as such.