We thought the industry pretty much agreed that compliance with the Global Investment Performance Standards (GIPS®) was a virtual requirement for asset managers targeting the institutional market, especially in the States, but we’ve recently encountered a couple firms who claim they meet with success in this market without complying.
While this may be true, we think they’re overlooking something.
What prospective clients are they not being considered for because they don’t comply?
No doubt there are investment consultants and plan sponsors who may favor compliance but don’t make it mandatory. But we believe many more strongly expect it or mandate compliance. Meaning, that a firm that is seeing some wins is not aware of the ones they’re not even being called for. I.e., how much money are they leaving on the table because of their non-compliance?
Many asset management firms identify their status vis-á-vis the Standards in online consultant databases. Many prospects check these sites to decide which firms to contact; and many note whether or not the firm claims compliance. Failing to comply means that you won’t hear from some of these firms.
To us, compliance is an investment; and we’ve heard from enough asset managers to know this is the case. And, verification is an investment, too, as prospects want some assurance that the firm truly is complying.
We also believe that the retail market’s interest in compliance is growing, as more managers see an advantage to comply and their prospects become more educated about the value of GIPS.
GIPS remains "best practice," when it comes to putting one’s performance track record together. Care to chime in? Please do!