Since 2006, the Global Investment Performance Standards (GIPS(R)) have required compliant firms to disclose “significant events.” But what, pray tell, is a “significant event.” In our lives we encounter significant events all the time, right? Births, deaths, baptisms, bar mitzvahs, weddings, and so on. But what are examples for an investment manager? The standards provide little guidance, so it’s up to the firm to decide, though their verifier should offer some assistance, too.
A few obvious examples:
- a new chief investment officer. Any major personnel change should be considered “significant.”
- acquisitions. Even if they don’t meet the portability requirements (meaning you can’t use the history), if they’re part of your firm definition going forward, they are significant.
- the hiring of a new head of performance. Okay, just kidding on this one … probably not deemed significant to your prospective clients. (But it should be, right?)
The test is “would this information be of interest to your clients or prospects?” or “would knowing this provide additional insights into the information contained in the presentation?”
A verification client acquired several mutual funds and thought that this wasn’t necessarily significant. However, since their introduction resulted in their assets under management during recent times to increase while those of many other firms dropped, I’d say this WAS significant, since without this information the reader might (wrongly) think that the firm had been able to avoid losing assets or accounts. The client has agreed with us.