43% of CIPM Expert Exam Candidates Pass!

We just learned that the scoring for the most recent test session for the CIPM (Certificate in Investment Performance Measurement) has been completed, and the results are that 43% of the 185 individuals who sat for the Expert Level passed. At the Principles level, 51% of 276 candidates passed. Candidates came from 31 countries.

As a long-time supporter of the program, I am pleased with these numbers for a few reasons: first, to see the breadth of countries represented is impressive. Second, the fact that less than 50% passed the expert says that it's becoming more challenging, which is arguably a good thing. The CIPM reflects a high degree of expertise in our profession, and  it should be both comprehensive and rigorous, which it is.

We congratulate those who have achieved the CIPM designation and those who passed the Principles level, and can now move on in the Fall to take the Expert. And, we encourage those who weren't successful to try again. You may want to avail yourselves of our firm's preparation courses. John Simpson, CIPM teaches them, and his students always comment very positively about how good they are. In addition, we offer Flash Cards which can also be quite helpful in the preparation process.

Inconvenient truths about "best practice"

The weekend Wall Street Journal rarely fails to provide me with ideas for this blog, and this past weekend was no exception, as Matt Ridley's article titled "Inconvenient Truths About 'Renewable' Energy" made me think about the issue of "best practice." And how was this? He begins with the question "What does the word 'renewable' mean?"  You may recall that I have asked this same question before regarding "best practice." The reality is that there are loads of different meanings, and so when it's used it's helpful to understand which definition the user is employing.

We know that the GIPS(R) (Global Investment Performance Standards) standards state that recommendations are "best practices," but fails to define what the term means. A colleague recently pointed out that the CIPM (Certificate in Investment Performance Measurement) program, too, uses this term; their website includes the following: "The CIPM program applies best practices in investment analysis techniques." (emphasis added)

And so, what is meant by this term? I will confess that I often use the term myself, but generally mean "in my opinion" or what I believe most performance measurement professionals would say or do.  I think it's helpful to understand what is meant when one uses such an expression, as it can be quite misleading without this clarification.

An overview of the CIPM program

We thought it would be helpful to introduce this video, which provides an overview of the Certificate in Investment Performance Measurement (CIPM) program. We support the program and encourage all performance measurement professionals to pursue it. If you won't, who will?

Do the letters mean anything?

Does it really mean a lot if someone has a string of letters after their name, such as PhD, CFA, CIPM, CPA, CAIA, FRM,...?

Well, I strongly believe that the answer is "yes"!

First, each set of letters represents an achievement. They indicate that the individual had to do something in order to be awarded the letters.

Second, they bring attention to the organization(s) that bestow the letters and the industry for which the letters are linked.

Take, for example, the CIPM: Certificate in Investment Performance Measurement. They let us know that the individual has achieved a certain breadth of knowledge in the field of investment performance measurement.  But in addition, they indicate that the field is one that is worthy of recognition itself. Performance measurement is a profession in which many very talented individuals have decided to invest their time and energy; why shouldn't they and the industry they serve get this recognition?

I'm a bit surprised by the number of investment performance measurement professionals who haven't yet pursued the CIPM certification. Granted some might say "well, I've been in the industry for 20 years so I don't need the certificate," which is definitely a truism. My friend Carl Bacon could have easily said this as Carl has achieved quite a degree of notoriety over the years, most of which is well deserved ... (sorry; just kidding! all is well deserved). But Carl decided to pursue the certificate in the very first "class." And why? I believe to honor the profession and the program. Others such as Neil Riddles and Douglas Lempereur did this, too, even though each of them is a CFA charter holder. The latter two, I believe, add credibility to the notion that simply because you have the CFA (as if obtaining it is "simple") doesn't mean you have achieved the breadth of knowledge about investment performance which the CIPM program tests you for.

If you're fairly new to the world of investment performance, you should pursue the CIPM certification in order to gain the knowledge and hopefully designation which will indicate to others what you've accomplished. And if you've "been at this game" for some time and believe your years speak for themselves, then I encourage you to still pursue the CIPM, if not for you then for the industry.

I occasionally hear folks say "well, the CIPM program hasn't yet caught on so why bother." Well, of course it won't "catch on" until folks like them DO bother. So make the investment: in yourself and in the industry!

CIPM help has arrived!

We've launched a new blog: CIPM Exam Tips & Tricks. It's based, to some degree, on our popular training programs and is managed by my colleague, John Simpson, CIPM.

The site goes into detail on a number of important aspects of the examination and will no doubt prove helpful to individuals taking either the Principals or Expert level. It will also be helpful, we're sure, to anyone who's interested in performance measurement. So please visit!

Verifiers should be CPAs ... or maybe not!

I just had the opportunity to comment on a discussion that's taking place in the CIPM (Certificate in Investment Performance Measurement) group on Linkedin. The question that was posed: "What can be done to make the CIPM credential more recognized and respected in the financial industry?"

Someone suggested that GIPS(R) (Global Investment Performance Standards) verifiers should have the CIPM; this suggestion was trumped with the notion that verifiers should be CPAs. A few others agreed with this suggestion. And, you will probably guess that all who did support this idea happen to have CPAs ... a rather self-serving suggestion. A colleague of mine from Canada (aka, the 51st state) who happens to be a CA (Chartered Accountant) has made a similar suggestion; one that obviously I take exception to.

I know that we don't want to get into a debate on the practices of CPA firms and discuss some of the irregularities that have surfaced over the years. And I also don't want to discuss how a verification is quite different from a financial audit; granted, there are some similarities, but to suggest that one needs to have gone through audit training is a bit ludicrous.

Our firm has replaced several CPA firms for clients; in every case, the prior firm had made numerous errors in their reviews. One in particular, by a very well known accounting firm, had been verifying the client for ten years, and every year giving them a verification report, even though their client didn't even have GIPS presentations for their composites! Plus, they were missing several composites. So much for the CPA designation.

I find it offensive that CPAs would make such a suggestion. The question that was posed dealt with the CIPM. While I fully support the CIPM program I wouldn't want to see possessing it be mandatory for a verifier. I would, however, encourage verifiers to obtain the CIPM as it provides them with an extensive knowledge of performance measurement; granted, not accounting, but accounting isn't part of performance measurement.

Performance & ethics

Calculating rates of return really isn't that difficult. And while we may debate whether returns should be calculated using money-weighting or time-weighting, such issues pale in comparison with the broader aspect of ethics.

I must confess that I initially thought that the Certificate in Investment Performance Measurement (CIPM) Program's emphasis on ethics seemed a bit excessive. And perhaps the exam questions could be geared more to the issues and situations that performance analysts and performance heads are more likely to encounter. But the issue of ethics shouldn't be ignored. We seem to be reminded of this on a fairly regular basis.

Yesterday's Wall Street Journal has an article on Raj Rajaratnam and his Galleon hedge fund. Recall that Mr. Rajaratnam has been accused of trading on inside information. His prowess at building relationships, which allegedly resulted in him gaining access to confidential information, allowed him to build a successful business and amass a fortune of more than a billion dollars.

Galleon's returns were apparently quite impressive. And one might not find any fault with the accuracy of the valuations or the return methodology employed. But what is the value of the returns if, as has been suggested, they reflect the results of illegal activity?

What is the responsibility of the performance analyst or manager, should they have reason to believe that the returns reflect illicit activity? Perhaps questions like these should be added to the CIPM program. What would YOU do, if you had reason to believe that the firm's results were arrived at through illegal means? Something to ponder, yes? 

p.s.,We are investigating another fraud case which might involve a firm that claimed compliance with the Global Investment Performance Standards (GIPS(R)). We will provide details once we've done further vetting of the information we've seen so far.

CIPM Exam Prep

Okay, if you're taking either of the CIPM examinations this Fall and are looking for training to help you, you're a bit late as we're holding training this week in New Brunswick, NJ. Sorry.

BUT, you can still obtain a set of "flash cards," which can prove very helpful in your prep work. We know of one colleague who claims he only used the flash cards to pass the principles exam! While we wouldn't encourage such a strategy, we do encourage their use.

They're available at a nominal cost of US$50. To learn more contact Patrick Fowler (732-873-5700: PFowler@SpauldingGrp.com). Note that these cards have been updated to reflect the revised examination materials!