GIPS® – Global Investment Performance Standards
CMG claims compliance with the Global Investment Performance Standards (GIPS). CMG has been independently verified for the periods January 2007 – December 2015. CMG is in the process of completing its 2016 verification.
GIPS is a set of standardized, industry-wide ethical principles that provide investment management firms with guidance on how to calculate and report their investment results. Although the adoption of GIPS is not mandated by regulation, it is considered best practice for investment advisors. The foundation for the GIPS standards was first established in 1987 with the creation of the AIMR Performance Presentation Standards (AIMR-PPS®), voluntary performance guidelines for the North American investment management industry. In search of a global standard, the CFA Institute approved Global Investment Performance Standards (GIPS) in 2005. The GIPS standards have replaced country-specific performance standards, providing for the comparison of investment performance internationally across firms.
To claim GIPS compliance, a firm must adopt, document and implement policies and procedures required by the GIPS standards. Compliance can only be achieved on a firm-wide basis, not on a strategy or portfolio by portfolio basis and compliance is all or none – firms cannot choose which standards they want to follow. All of the standards must be adopted. Policies and procedures affect all aspects of the firm, not just performance calculation. Implementing the internal controls and processes requires coordination across operations, compliance, marketing and client relations. A strong internal culture and commitment to best practices are mandatory as GIPS compliance is not a one-time process – it is an ongoing effort. Performance composites are the result of implementing the GIPS standards. A composite is an aggregate of all portfolios that are managed according to a similar investment objective or process. All fee-paying clients invested in a strategy are required to be included in at least one composite. The result is the most comprehensive approach to performance reporting that provides investors with meaningful information to diligently assess a firm’s track record.
Currently, there are 1,405 firms worldwide that claim compliance with GIPS standards, according to the CFA Institute. While all of these firms claim compliance, only a select number of those firms proceed with verification. Firms that claim GIPS compliance adhere to all applicable requirements of the GIPS standards but do so through an ethical commitment to best practices. Third party verification brings additional credibility to a firm’s claim of compliance and requires robust review of performance composites and thorough testing of policies by the independent party. CMG chose Ashland Partners, an industry leader with eight offices worldwide, for verification because of their long history as a GIPS service provider. Since its founding in 1992, Ashland’s sole focus has been on providing GIPS compliance and verification services to the investment management industry. CMG’s verification report is available upon request.
The GIPS standards are a best practice in the asset management industry that benefits two main groups: investment management firms and investors. For investors, both current and prospective, GIPS standards offer a greater level of confidence and transparency in the investment advisor they choose. Compliance with GIPS standards increases the credibility of investment firms that have chosen to adopt the standards and the additional step of verification provides investors with the added assurance that comes from an independent assessment by a third party. Additionally, since GIPS standards are global, investors can make apples-to-apples comparisons across investment managers and strategies around the world. For discerning investors seeking to make the best choice for an investment partner, GIPS helps to evaluate, supervise and hire the best.
If you would like to learn more about GIPS please visit www.gipsstandards.org. The website provides numerous resources to investment advisors and investors including the most current edition of the GIPS standards, a Q&A database, and guidelines on how to seek compliance or verification as well newsletters that highlight GIPS and its impact on the investment industry.
If you would like to learn more about GIPS verification or Ashland Partners please visit www.ashlandpartners.com.
“GIPS® is a registered trademark of CFA Institute. CFA Institute has not been involved in the preparation or review of this report/advertisement.”
CMG Capital Management Group, Inc. (“CMG”) is an independent SEC registered investment adviser located in the Commonwealth of Pennsylvania. CMG provides tactical investment management to both institutional and retail investors.
A prospective client can obtain a compliance presentation and/or the firm’s list of composite descriptions by contacting CMG at email@example.com or by calling (610) 989-9090.