If you look on pages 17-18 of my comment letter to the GIPS Exposure Draft you'll find the following:
Overlays: The standards don’t speak to overlays. Overlays deal with exposure, not real market values. Many overlay managers believe they can’t comply with GIPS because of this difference. I would like to see the standards speak specifically to overlays and have exposure take the place of market value.
The GIPS Executive Committee did not take me up on my suggestion, but this is probably understandable, given that this would mean introducing brand new material into the Standards, which arguably would have warranted yet another round of comments. Hopefully GIPS 2015 will reference this topic. But, that leaves open the question, "what to do in the meantime?"
It is my position that for overlay managers, the "exposure" is equivalent to "market value," and that these firms therefore should be able to claim compliance. There is only one Q&A on the GIPS website that speaks to the topic of "overlays," and it does not rule out the ability for a firm to include overlays, and so I believe this gives credibility to my position.
I recommend that overlay managers who wish to comply use their "exposure" in an equivalent way to "assets under management," because this is essentially it is. They should include appropriate disclosures explaining what the information means. I think this is reasonable and in the spirit of the Standards. Have a different view? Let us know.