Funds Seek Performance Measures

Terry Flanagan

Global Investment Performance Standards (GIPS) presents operational challenge.

The need to objectively quantify hedge fund performance is proving daunting for fund administrators, who have traditionally focused on back-office accounting tasks.

The Global Investment Performance Standards (GIPS), published by the CFA Institute, which seeks to track fund performance, falls outside the traditional fund administration sphere.

“Fund administration is mainly back-office, but GIPS is a classic middle-office function,” George Michaels, CEO of G2 FT, told Markets Media.

The GIPS standards are ethical standards for investment performance presentation to
ensure fair representation and full disclosure of investment performance. In order to
claim compliance, firms must adhere to the requirements included in the GIPS standards.
Fortunately, solutions exist for GIPS compliance, such as StatPro.

StatPro Composites is a web-based, multicurrency and multilingual composites solution that streamlines the process of complying with GIPS.

The application enables asset management firms to reduce operational risk from failures in data control through the automation of composites creation, calculation, maintenance, and the creation of auditor ready reports.

The product has enabled over 500 GIPS compliance verifications globally and
continues to benefit from expansive technology upgrades, the company said.

Initially, GIPS were born out of the frustration of pension fund trustee’s inability to differentiate between good and bad asset managers in the mid 1980s, according to Carl Bacon, chairman of StatPro.

“Without standards it appeared that all managers were above average performers,” he said.
Marketing departments of asset managers would “cherry pick” good performing accounts, choose beneficial time periods, hide important caveats in the small print and self-select return and valuation methodologies to ensure good but non-representative performance, said Bacon.

StatPro Composites is part of StatPro Seven, an integrated portfolio analytics suite, which includes the following modules: performance measurement, risk management, attribution analysis, compliance, reporting and index data.

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