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Celebrating 30 Years of the Global Investment Performance Standards (GIPS)

Celebrating 30 Years of the Global Investment Performance Standards (GIPS)
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3 min, 26 sec

A look back at the history of the CFA Institute Performance Presentation Standards: an industry game changer.

Manager performance composites weren’t always a useful tool to assess historical manager performance. Prior to the mid-1980s, reporting on and assessing investment performance was the “Wild West” for fund sponsors and consultants. Many managers were merely putting their best foot forward in presenting historical performance for manager searches by culling out accounts from their composites that they didn’t consider as being “representative.” Callan and other consultants had to compare actual client results with the composites managers were providing for search completions in order to assess actual performance.

Finally, a group of money managers had had enough of what they saw as unfair competition. Remembering the names of the people and firms involved in this industry game changer is an interesting part of the evolution of the Global Investment Performance Standards (GIPS).

In August 1986, Fred Muller of Atlanta Capital Management and chair of the Financial Analyst Federation (FAF), the forerunner to the Association of Investment Management Research (AIMR), asked Claude Rosenberg of Rosenberg Capital Management (now RCM) to form a blue-ribbon committee called the Committee on Performance Presentation Standards (CPPS). This committee was asked to make practical recommendations on specific methodologies for investment managers to follow in presenting their performance records.

The Committee consisted of Claude Rosenberg Jr., the chair, and members Tad Jeffrey of Jeflion Investment, Bob Kirby of Capital Guardian, Dean LeBaron of Batterymarch Financial, and Jay Sherrerd of Miller Anderson & Sherrerd.

In September 1987, after review and commentary from the readership of the Financial Analysts Journal, the CPPS submitted its report for approval by the FAF. This report was the first milestone in the ongoing effort to establish the Performance Presentation Standards (PPS).

In 1990 a PPS Implementation Committee was established to refine the guidelines and assist investment managers in applying the standards. This committee labored for 10 long years to establish voluntary acceptance of the PPS throughout the industry. In March 1993 the initial PPS Handbook was published. After publication the bulk of the committee’s time consisted of answering questions from managers on how to implement the standards for their own special circumstances.

The PPS Implementation Committee was co-chaired by Lee Price, RCM Capital Management, and Chuck Tschampion of General Motors Investment Management. Committee members included Dwight Churchill, CSI Asset Management; Kathleen Condon, Bankers Trust Company; Thomas Drumm, Keystone Group; Creighton Gatchell Jr., Cunningham, Henderson & Papin; David Kirr, Marbach & Co.; Fred Muller, Atlanta Capital Management; and Ron Peyton, Callan.

Industry leaders in asset management were early adopters of the PPS, including Atlanta Capital Management, Batterymarch Financial, Brinson Partners, Capital Guardian Trust, Donaldson, Lufkin & Jenrette, J.P. Morgan Investment Management, Lincoln Capital Management, Miller Anderson & Sherrerd, RCM Capital Management and Templeton International. Many large fund sponsor organizations also supported the standards. We owe all of these organizations our thanks for their service to our industry, as without their support the PPS would never have been widely adopted.

The new standard manager performance composites were a game changer for the industry. For the first time, historical databases were restated with accurate, comparable performance composites. There was quite a bit of controversy created by the changes in the performance ranking of some managers. Expensive printed brochures and marketing materials that had described top two quartile performance had to be revised. The PPS also created a new industry of firms that provided independent performance verification of manager composites.

The PPS were such a success that AIMR established a Global Investment Performance Committee and formally endorsed the GIPS on February 19, 1999. Today, managers all over the world voluntarily provide their composites in compliance with GIPS. Many of the firms that are responsible for the standards are no longer around today in their original form. However, they provided an important service to our industry and they deserve to be recognized.

CFA Institute Timeline

  • The Financial Analysts Federation (FAF) was established in 1947
  • The FAF established the Institute for Chartered Financial Analysts (ICFA) in 1950 to administer the CFA examination
  • The FAF and ICFA later merged to become the Association of Investment Management Research (AIMR), which was renamed the CFA Institute in 2004

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