Verification Process for Asset Owners

The verification process for asset owners is similar to the process for asset managers.  We want to ensure that:

  • The firm has complied with all the composite construction requirements of the GIPS standards on a firm-wide basis and
  • The firm’s policies and procedures are designed to calculate and present performance in compliance with the GIPS standards.

There will typically be three ‘phases’ to a GIPS verification

  • Planning
  • Testing
  • Wrap up and reporting

During the planning phase, we will ask for various information and data to get an organization-wide perspective, such as information on total firm assets and the organization’s GIPS policies and procedures manual.

During the testing phase, we will most likely ask for more detailed information as we conduct testing to drill down and cover aspects of the organization’s compliance, such as:

  • Firm definition (for GIPS purposes)
  • Total firm assets
  • Composite construction
  • Composite membership (portfolio-level testing)
  • Data review (income, valuation)
  • Calculation review
  • GIPS P&P review (is it accurate, complete, current)
  • Compliant presentation review
  • Recordkeeping

During the wrap-up and reporting phase, we will address any follow up needed from our testing phase, such as any findings that need to be addressed and/or recommendations we may have.  We will also obtain a representation letter from the organization confirming that they comply with the GIPS standards and that their policies and procedures to obtain and maintain compliance are as described in the GIPS policies and procedures manual and that they have been consistently applied.  Finally, we will issue a GIPS verification report.

The organization may also want to consider getting a performance examination on one or more composites.  These are a focused review of a particular composite compliant presentation where we increase testing and issue an additional examination report for a composite (in addition to the organization’s GIPS verification report).  We typically try to discourage performance examinations and only encourage firms to do them when necessary.  However, we do see that asset owners typically do want performance examinations on their composites.  As such, we would conduct these concurrently with the GIPS verification to make the process as efficient as possible.