The Value of GIPS Compliance: 2018 Manager and Consultant Survey
As the Global Investment Performance Standards (GIPS®) gain more acceptance and international adoption, and with CFA Institute’s expected release of the 2020 GIPS standards for public comment, there are persistent questions about the current state of GIPS compliance.
- Who claims compliance with the GIPS standards, and why?
- Who receives independent third-party verifications?
- What value do consultants and investors place on compliance with the GIPS standards?
To address these questions, eVestment and ACA have co-sponsored an industry survey focusing on various stakeholders’ perspectives on the value of GIPS compliance. The initial survey was first released in 2009 and later updated in 2012 and again in 2014. The 2018 report is the fourth update on industry-wide views of compliance with the GIPS standards.
“The survey results indicate a potential major shift for alternative managers, with three out of four consultant responses indicating that they expect to start requiring hedge fund and private equity managers to comply with the GIPS standards,” said Justin Guthrie, Partner at ACA. “This is a fundamental change to asset classes that have historically had very low rates of compliance.”
The survey of institutional asset managers, consultants, and investors shows that compliance with the GIPS standards continues to be a powerful force. According to the survey,
- 94% of asset management firms that claim compliance receive a verification, up from 87% that reported being verified in the 2014 survey.
- Among investors and consultants, 75% said third-party verification is important or very important in the manager search process.
- 3 out of 4 consultants/investors exclude managers from searches some or all of the time if there is not a claim of compliance with the GIPS standards.
- 94% of consultants/investors believe more pension funds, foundations, endowments, and other asset owners will claim compliance when the 2020 GIPS standards are released.
- 75% of consultants/investors said they expect to start requiring GIPS compliance for alternative investment managers like private equity firms, hedge funds, and real estate investment managers.
- 67% of alternative asset managers believe investors and consultants will ultimately require alternative managers to comply with the GIPS standards.
“The institutional investment industry is moving toward more transparency across all asset classes, which is something eVestment has championed since our founding in 2000,” said eVestment Global Head of Strategic Engagement John Molesphini. “The increases across the board in the findings of this new GIPS survey is further evidence of this trend.”
ACA has helped many firms in their efforts to claim compliance with the GIPS standards. For more information or questions, please reach out to your ACA consultant or contact us below.