Recent Institutional RFP Mandates Requiring GIPS Compliance of Alternative Investment Managers and OCIOs
As a leading global provider of GRC solutions to the investment industry, we keep our finger on the pulse of the industry and provide informative insights on various trends. Each quarter, we provide our feedback on recent institutional mandates related to compliance with the Global Investment Performance Standards (GIPS®) and how those mandates ask about the calculation and presentation of performance. Within these quarterly updates, we provide our insight into the demand for compliance with the GIPS standards and how that demand is evolving over time.
During the second quarter of 2021 we documented 12 mandates that were issued by investors where compliance with the GIPS standards was either asked about, recommended, or required. The following is a sample of those mandates:
|Issuer||Date||Mandate||Mandate Size (USD)||Reference(s) to Performance|
|City of Los Angeles Fire & Police Pensions||April 14, 2021||Private Credit||$300M||“Is the (performance) data GIPS compliant?”, “Are your returns audited? If so, please provide details”|
|LACERA||April 15, 2021||Private Equity||~$500M||“Are the firm’s returns GIPS compliant? If so, are your returns audited? Please attach a copy of the verification letter from the firm’s auditor.”|
|Penn SERS||May 25, 2021||US Microcap||Up to $700M||“It is preferred that the composite is calculated in accordance with CFA Institute Global Investment Performance Standards (“GIPS”) – required methodologies or other appropriate methodologies. Note that GIPS required methodologies refer to both the calculation of returns and the creation of maintenance of the composite.”|
|Municipal Finance Authority of BC||May 3, 2021||Outsourced Chief Investment Officer (OCIO) and Asset Management Services||$300MCAD Initially growing up to $1.3B CAD over 5 years||“The Proponent firm must be a UN PRI Signatory and fully comply to the Global Investment Performance Standards (GIPS)”|
The second quarter of 2021 provided us with a great illustration of the trends we are seeing more broadly across the industry. Investors continue to push alternative managers to consider compliance with the GIPS standards through pointed questions about whether applicants are claiming compliance. While we have not seen many requirements for compliance, it is safe to assume that these questions are being used as a potential screening filter when assessing multiple applicants. Naturally, this offers an opportunity for some firms to capture a competitive advantage by claiming compliance and better aligning their performance reporting practices with industry best practices.
In addition, we continue to see a strong push from investors for outsourced chief investment officers (OCIOs) and consultants to comply with the GIPS standards to be eligible for certain mandates. This trend was highlighted in a recent ACA blog post: Client demand and regulation are driving trends behind OCIOs claiming GIPS compliance.
Compliance with the 2020 GIPS Standards
About the author
Jamie Stewart, CIPM is a Director with our performance services division. Jamie has worked in the investment performance industry since 2012 and specializes in working with advisors to understand ACA’s service offerings and how they align with their goals. Jamie earned a Bachelor of Science degree in Business Administration with a minor in Marketing and MBA from Southern Oregon University. He also earned his CIPM in in 2017. Jamie is based in Portland, OR.