GIPS in real life AM

Water Cooler Investing
#1

I don’t manage assets as a career, so I can’t answer the following question :

Are GIPS relevant in the real-world ?

The reason I ask is because I find the inclusion of GIPS in the Level III Curriculum very questionable.

Is it just a few Back-Office/Compliance fat guys with bad suits who think they are being relevant with their GIPS standards ?

#2

I think pretty much all major AM firms follow GIPS standards. And any smaller firms should certainly try to follow them. It is important for the industry to have consistent standards for reporting performance. I never felt there was an over-emphasis on GIPS in the curriculum.

#3

Thanks for the info Carson.

For the record : I find the GIPS idea good as well as its underlying principles. However I do believe that the way the CFAI includes GIPS in the curriculum is ridiculous.

#4

I haven’t come across a large sized firm that doesn’t use GIPS. If managing equities or IG fixed income, I think its a must. It would be interesting to hear people in the investment consulting world chime in on this.

Not sure why you find the inclusion ridiculous… part of the mission is to establish standards.

#5

^^

Thanks for the info.

Again, it is the way that they are making us study for it which I think is ridiculous.

There is absolutely zero value-added in making us learn by heart the changes in methodology depending on all the dates where the GIPS modified their methodology.

They should make us focus on key concepts.

#6

We follow GIPS and, as far as I’m aware, so does every other mutual fund company. Of course, GIPS is for the underlying composite the fund follows, not the fund itself.

When I’m talking to an institutional buyer that wants a separate account, we have to have all the GIPS disclosure slides in our decks. If I’m selling the fund version, we don’t have to put in the GIPS stuff.

#7

Well that’s all very good to know.

Makes this shit less painful to learn.

Thanks guys.

#8

Yeah. I get that it is pretty annoying to have to go through all the minute details of the standards for the exam. After you are done studying, if you ever need to refer to the standards you can just look them up.

But then, you could make that argument about a lot of parts of the curriculum I guess!

#9

^That’s why we have a compliance department.

#10

A friend of mine who studied for the CFA was talking to his GF about her new job at Goldman Sachs. She said “it has something to do with GIPS compliance, whatever that means.” ha ha

#11

I think the exposure to GIPs in curriculum was appropriate if not terribily fun…I do agree it should have been forward looking as of a given exam date and some of the “look back” time dating minutiae was not terribly productive but I don’t know they ever tested around those things

#12

I thought it was really sneaky when no gips appeared on my level 3 exam. All that time wasted.

#13

But that’s part of the fund of the exams, no? Pretty much each year you can be guaranteed there will be some seemingly important chapter that receives no questions at all and then another obscure item mentioned very briefly in a single paragraph that is the subject of one or more questions.

#14

I love the smell of GIPS in the AM.