GIPS reporting requirements - 5 or 10 years?

Quick question:

Are 5 or 10 years required for a GIPS compliant presentation? The curriculum says that must show 5 years and must then be extended until 10 years. So not sure if 5 or 10 is the must.

Thanks for you help

If I understand correctly (might be mistaken), if an investment firm has been present for say 7 years, then it must show GIPS compliance for the last 5 years, and then for the next 5 years from now on. So the last 5 years start from when you’re applying for GIPS.

Appreciate if someone can correct me though if am mistaken.

That is my understanding too. Not sure if that is the recommended number of years , but it is required for compliance with GIPS standards

You did get my question. thanks a lot, very helpful.

If I’m not miskaken, if firm is a recently started one, they can present less than 5 years GIPS comliance performance. However, as they go foreward add up to 10 years.

5 years when you first become compliant. If the firm hasn’t been in existence for 5 years, you show since inception. You then need to add a year of performance each year until you are showing 10 years.

No intend to cause confusion. “5 years” applies to the composite also. The creation date of the composite may be earlier or later than the firm’s inception date.

Good point, thanks!

This has always confused me. “After presenting at least five years of compliant history, the firm must add annual performance each year going forward, up to ten years, at a minimum.” (Schweser Book 5 Page 181).

Two questions:

  1. So this means that if your firm has been in existence for 7 years and you apply for GIPS today (2012), you need to show compliance for 2006-2011, and then every year going forward for another 5 years through 2016. Okay so now you have ten years of history. Then in 2017, you are allowed to show only 2007 - 2017, and then in 2018, you can remove another year and show only 2008 - 2018–so in other words you can always keep a minimum of 10 years and once you hit the 10 years you can keep deleting the earliest year?

  2. The bullet point right under what I quoted above says “Firms may link years of noncompliant performance but must present only complaint data for period beginning or or after January 1, 2000.” This conflicts with the above, doesn’t it? The first bullet says that 2000- 2006 does not need to be compliant in my exmaple since I need to only show 5 years back, but then next bullet says nothing after 2000 can be noncompliant.

There is no contradiction . The GIPS standard says you must show minimum of 5 , then build it up to 10 by adding a year each year . There is no restriction on adding the year and not dropping a year . so you can go to 10,11,12,13 etc etc if your performance is consistent and nothing to be ashamed about , why not show more of it ?

But in so doing you cannot use any year after 2000 where the firm or compsoite presentation was non compliant per GIPS standards. That is a separate restriction and is completely othogonal

GIPS is a verification process that will eventually cover every facet of a financial analyst’s life. it starts with standards for portfolio performance, but it will only grow in scope over the years. when you are 75 years old getting a colonoscopy, there will be a GIPS verification specialist making sure it is being done right. when you are dead and your children are burying you in the grave, there will be a little marker in the lower right corner of your tombstone saying “GIPS Verified”.

the contradiction is that you only have to show minimum of 5 years compliance but we are currently in 2012.

so if i try to seek compliance today then i only have to show back to 2007.

if i understand currently, when you say “buildig it up a year” you mean that after you show 2007-2012, then you add 2013, 2014, etc. but you never have to go back to 2000.

but a separate standard says that nothing after 2000 can be noncompliant. so what about 2000 - 2006?

let’s say 2000-2006 was really hot for your firm , you did awesome ,nothig to be ashamed about , but unfortunately 2001 and 2002 you were not doing things in GIPS style. 2000 was not required to be GIPS compliant , but 2001 and 2002 were , so you have to drop all 3 years.

Ok , then 2003 is the first of the awesome years you can use. tough.

You cannot cherry pick , i.e. include 2003-2006 which were compliant , then drop 2007 which sucked and then include 2008 - 2012 which were so-so.

You must keep a continuous record fom 2003 and show every year after that . let’s say the marketing department were uncomfortable and wanted to show 2008 -2013 only , well for a firm that’s been doing 2003-on , that is not possible until 2012 at least , then they can , if they wish , start dropping 2003 in 2013 , 2004 in 2014 etc. That seems fair and unbiased . They will be showing 10 continuous years.

Or they can show 13 or more which includes the effect of the sucky 2007 and the awesome 2003 -2006 also . This is their choice.

also if you had a composite that started up in 2000 - and you wanted to include that in your GIPS compliant presentation - you need to show the bad years (going on Jana’s example) …

You cannot include that composite in your presentation for 2003 onwards ONLY.

Am I right on this? [Or am I missing something?]

ok so the whole idea of the 2000 and later compliance standard is simply that if you DO show GIPS for 2000, then going forward you have to show it for all years?

so if i ask for compliance in 2012, i have to show 2007-2012 and then every year after 2012 up to 10 years. if i decide i want to show 2002, then i have to show 2003 and 2004 and 2005 and 2006 as well. i cant just show 2002 and skip some years? is that the whole point of the below standard?

“Firms may link years of noncompliant performance but must present only complaint data for period beginning or or after January 1, 2000.”

yes . They don’t want to appear prudish by hammering the point , but that is precisely what firms may try and do if left to themselves .

They tried to create a level playing field and be fair. It is complicated because firms can trot out one excuse or another to show only their good years , plus some haven’t been around for more than a few years , and some don’t have resources except lately etc etc.

To compliance 2012, you need to show 2008 to 2012, not 2007 to 2012, right?

I think you’d have to show 2007 since 2012 is not finished

In case of a past firm linked to a new firm, which firm’s inception date will be used?