Global Investment Performance Standards (GIPS ) Executive Committee Strategic Plan June 2014

Transcription

1 Global vestment Performance Standards (GIPS ) Executive Committee Strategic Plan June 2014

2 Background The mission of the GIPS Executive Committee is to ensure that the GIPS standards are the premier performance standard globally and continue to represent best practice for the calculation and presentation of investment performance information. The GIPS Executive Committee developed this strategic plan to specify the activities and initiatives to be undertaken in order to achieve its mission. The strategic plan was developed though input from various stakeholders and insights from industry leaders. The plan is intended to be dynamic and reflective of the needs of the industry as they change over time. CFA stitute and the GIPS Executive Committee welcome ongoing input and feedback regarding the needs of the industry and the prioritization of the various initiatives. The strategic plan is structured around six E s : Evolve, Expand, Engage, Evaluate, Extend, and Educate. Each E is supported by numerous strategic priority milestones, which are categorized as either,, Priority 2, or Priority 3. These relative levels of priority are based on stakeholder input, needs assessment/perceived demand, and judgment by the Executive Committee. Key The Executive Committee identified the five topics below as the highest priorities as current projects are completed and resources are made available. 1. Pooled Funds and Retail Products The GIPS standards lack clear guidance regarding the treatment of pooled funds and retail products. general, firms want to include assets from these products in total firm assets, yet few provide compliant presentations to prospective pooled fund investors. At the same time, presenting composite performance that includes multiple portfolios may not be appropriate to present to a prospective pooled fund investor. Firms are unclear about their responsibilities, which has led to inconsistent treatment. Certain markets are dominated by retail pooled funds and in order to reach these markets, it is critical that clear guidance be developed. 2. Risk Guidance The 2010 edition of the GIPS standards makes a clear statement that performance encompasses both risk and return. The 2010 edition of the GIPS standards introduced a few provisions related to risk, whereas prior editions had been very limited in addressing risk. It is essential to develop guidance on risk and applying the risk-related provisions. The guidance will explain the provisions, provide examples, and offer direction to firms. 3. Update Supplemental formation Guidance Statement The use of supplemental information continues to be an area of confusion. Clarity is needed regarding what is supplemental information, what must be labeled, and where it can appear. addition, when a firm introduces a new product and presents model, hypothetical, or back-tested performance, guidance is needed regarding how this information can be used. 4. Guidance on Overlay Assets The GIPS standards currently offer little guidance regarding the treatment of overlay strategies. Overlay strategies present a number of challenges including calculation of firm assets, composite construction, and return calculation. The growth of overlay strategies underscores the need for guidance in this area. 5. Update/Expand Performance Record Portability Guidance Statement The ongoing consolidation and merger and acquisition activities in the industry highlight the need for clear guidance related to the treatment of the performance records of the firms. many instances it is the performance record that is being acquired and clear guidance in this area is a necessity. Merged composites and determination of a surviving track record are specific areas that require clarification. addition, guidance is needed regarding the period of time between acquisition and full integration into the merged or acquired firm CFA stitute 2

3 6. Guidance Statement for Asset Owners (Application of the GIPS Standards to Pension Plans, Endowments, Foundations and Other Similar Entities) The purpose of this Guidance Statement is to address the application of the GIPS standards from the perspective of entities that manage investments, either directly or through the use of external managers, on behalf of participants, beneficiaries or the organization itself, but typically do not compete for business, i.e. do not have prospective clients. These entities include, but are not limited to, pension funds (both public and private), endowments, foundations, family offices, other institutional asset owners, and fiduciaries that have investment responsibility for a pool of assets. If these entities have discretion over the assets under management, they are able to claim compliance with the GIPS standards. The final draft of this important guidance was approved by the GIPS Executive Committee at their open meeting in June 2014 in Charlottesville and will be released soon CFA stitute 3

4 Strategic Plan June November 2013 Mission: Promote ethics and integrity and instill trust through the use of the Global vestment Performance Standards by achieving universal demand for compliance by asset owners, adoption by asset managers, and support from regulators for the ultimate benefit of the global investment community. 1.0 EVOLVE - develop interpretations and guidance on the application of the GIPS standards. Status Remarks 1.1 Review existing Q&As in database and revise or retire as necessary. 1.2 Develop guidance addressing risk and applying the risk-related provisions (including real estate, private equity, and other alternatives) Progress Q Estimated to be completed December Guidance in development, draft presented to Executive Committee in June Exposure Draft forthcoming. 1.3 Develop guidance on applying the GIPS standards to retail products (e.g., pooled vehicles). 1.4 Review and Update Guidance Statement on Portability. Q Working group established and has begun work on draft guidance on firms responsibilities related to providing compliant presentations to prospective clients, composite vs. fund performance, gross/net returns, treatment of fees and expenses. Draft presented to Executive Committee in June Further guidance for mergers and acquisitions, determining surviving composites, etc. terpretations Subcommittee drafted guidance for review by the GIPS Executive Committee at their June 2014 meeting CFA stitute 4

5 1.5 Review and update Guidance Statement on Supplemental formation. 1.6 Develop Guidance on Overlay Strategies. 1.7 Review and update Guidance Statement on Fees. 1.8 Develop guidance on applying the GIPS standards to pension plans and other institutions. 1.9 Develop guidance on implementing the GIPS standards for firms in developing markets. 1.10a Develop guidance on internal rate of return (IRR) specifically addressing use of IRR Review and update Guidance Statement on Composite Definition. Status Remarks 2012 queue Consideration for how supplemental information must be treated, labeled, where/when it can be shown, and what can be shown outside of a compliant presentation Working Group has been formed and is actively drafting guidance that several Executive Committee members initially developed for the Working Group to use as the basis for the Guidance Statement. queue Guidance on reflecting performance based fees, netting of expenses, bundled fees, and calculating net returns. EMEA RIPS formed a subgroup at its November 2012 meeting to address this guidance. Priority 2 Guidance Statement released for public comment with over 30 comments submitted before comment period concluded on 1 August Comments were reviewed and the final draft was approved by the Executive Committee at their open meeting in June The final version is being prepared for release soon. Priority 2 Firms in developing markets face unique challenges when first coming into compliance. This guidance will offer suggestions and solutions for some of these challenges. Paper in development by the vestment Manager Subcommittee and was submitted to GIPS EC at March 2013 meeting in Brussels. The vestment Manager Subcommittee will incorporate the EC feedback and resubmit it to the EC for review. queue Priority 2 Examine application of IRR to strategies/structures outside of private equity and closed-end real estate funds. queue Priority 2 Specific focus on consistency and comparability of composite definitions, benchmark appropriateness (update benchmark and attribution paper) CFA stitute 5

6 1.12 Develop guidance on defining materiality Develop Guidance on the Treatment of Multiple Asset Portfolios Develop guidance on verification techniques Develop guidance on verifier independence. 1.10b (see 1.10 above) Develop guidance on internal rate of return (IRR) specifically addressing calculation of IRR Review and Update Advertising Guidelines Develop guidance on applying the GIPS standards when a firm first comes into compliance Review and update Guidance Statement on Significant Cash Flows Review and update Guidance Statement on Wrap/SMA Portfolios. Status Remarks queue Priority 2 Develop criteria to assist firms in determining materiality and establishing policies. June 2014 queue Priority 2 Determine how to treat portfolios with multiple asset classes (e.g., equity, fixed, real estate, private equity), address which provisions apply, how to treat timber, private debt, and currency. queue Priority 2 Issue guidance on criteria that verifiers should use for different types of testing. queue Priority 2 GIPS Executive Committee added this at the Charlottesville -person October 2012 meeting. queue Priority 3 Provide guidance on calculation of IRR, dealing with multiple roots, IRR vs. XIRR, gross-of-fees vs. net-of-fees. queue Priority 3 Determine if revisions are necessary to provide firms with additional options and make the guidelines more conducive for marketing. queue Priority 3 How should firms treat topics where there was no guidance historically? What provisions should be followed when applying the GIPS standards historically? queue Priority 3 Expand guidance on the use of temporary accounts. queue Priority 3 Re-evaluate framework/allowances for wrap/sma portfolios, records requirements CFA stitute 6

7 2.0 EXPAND add new content to the GIPS standards as needed. Status Remarks 2.1 Examine the feasibility of developing provisions or guidance related to transition management. 2.2a Examine the feasibility of developing presentation, disclosure and input requirements specific to attribution. 2.2b Examine the feasibility of developing requirements related to attribution 2.3 Examine the feasibility of developing a global framework for calculating and presenting after-tax performance. 2.4 Examine the need/feasibility of developing provisions or guidance related to infrastructure strategies, commodities, and/or new strategies. queue queue queue queue queue Not prioritized Determine applicability of the GIPS standards to transition management and if/how transition management should be treated. Not prioritized Determine if principles for the presentation and input selection should be added to the GIPS standards. Not prioritized Not prioritized Determine if global principles can be identified for calculating after-tax returns. Not prioritized June CFA stitute 7

8 3.0 ENGAGE increase the involvement of investors, regulators, and country sponsors. Status Remarks 3.1 Design and implement a plan to engage investors (including sovereign wealth funds) and investment consultants. 3.2 Design and implement a plan for reaching out to regulators. Develop stronger ties with asset owners and consultants to ensure their needs are met and demand for compliance remains strong. Model RFP Template specific to GIPS standards created. CFA stitute marketing staff developed a deliverable suitable for posting on the GIPS website, direct mailing, and as a handout for conferences. Final document posted on the GIPS website, distributed at GIPS Annual Conference, also to Country Sponsors and all Subcommittee members. Webcast targeting investors and consultants produced and posted on GIPS website. Goal to work toward harmonization and reducing conflict between regulations and the GIPS standards. EMEA RIPS Regulator Relations Working Group formed and first in-person meeting held November 2012 in London. Canada, Mexico, Peru, dia, Korea, donesia and Malaysia regulator outreach CFA stitute 8

9 3.3 Evaluate participation of the existing Country Sponsors and develop plan for improving participation. Status Remarks Provide mentoring, guidance, and resources for improving Country Sponsor performance and effectiveness. Country Sponsor survey conducted in January 2012 GIPS Executive Committee reviewed findings at their March 2012 in-person meeting in Brussels. New PowerPoint presentation created in collaboration with vestor/consultant and Promotion & Awareness Subcommittees GIPS Mission and Vision A Road Map has been posted on the GIPS website and distributed to GIPS Country Sponsors. GIPS governance proposal approved by CFA stitute Board of Governors in March Revised Country Sponsor Agreement draft distributed for Country Sponsor feedback with a deadline of 7 July CFA stitute 9

10 4.0 EVALUATE - review governance structure to ensure smooth administration and oversight of the GIPS standards. 4.1 On-going review and evaluation of governance structure. 4.2 Examine options for tracking compliance rates. 4.3 Explore the feasibility of verifier oversight and registration. 4.4 Refine process for the creation and approval of guidance, Q&As, etc., including vetting process for country sponsor-developed papers. Q Status Remarks Executive Committee will continue discussions on governance structure at November 2013 meeting in conjunction with broader strategic planning sessions. Executive Committee and CFA stitute Board of Governors approved GIPS governance restructure in March Implementation has begun with recruitment for volunteers and transition of current Executive Committee members to the new Technical and Executive Committees. Develop plan for gathering market data and conducting market research; proposal in development with market research department. Proposal for firm compliance repository to be presented at November 2013 meeting. Exposure Draft for Firm Notification Requirement was released for a 90 day public comment period to end on 7 July queue Determine if/how verifiers should be overseen in order to provide some level of quality control. Ann Putallaz to discuss with United States and Canada Country Sponsors and consider creating an initial draft document. queue Priority 2 Staff to formalize and publish process for greater transparency on GIPS website CFA stitute 10

11 5.0 EXTEND increase the depth and breadth of the reach of the GIPS standards, both geographically and by asset class/investment type. Status Remarks 5.1 Focus outreach efforts on firms, industry groups, consultants, and asset owners. 5.2 Engage Country Sponsors, including strategic focus on the Middle East, Latin America, China, and dia. 5.3 Work towards achieving higher rates of compliance in the private equity, real estate, hedge fund, and retail industries. New PowerPoint presentation created in collaboration with vestor/consultant and Promotion & Awareness Subcommittees GIPS Mission and Vision A Road Map has been posted on the GIPS website. Model RFP Template specific to GIPS standards created and widely distributed. Guidance Statement on Pension Funds, Endowments, Foundations and Other Similar Entities released for public comment that concluded on 1 August Over 30 comments submitted that are currently under review before finalization of the Guidance Statement. Final draft of Guidance Statement on Pension Funds, Endowments, Foundations and Other Similar Entities approved by the GIPS Executive Committee at their open meeting in June 2014 and will be released soon. Identify key organizations and people to meet with to promote the GIPS standards. Philippines Country Sponsor approved Thailand Country Sponsor approved Currently working with interested organizations in Turkey, Brazil, Chile, Czech Republic, Cyprus, Nigeria, Bahrain, Argentina, and Uruguay. Priority 2 Identify key industry organizations and people to meet with to identify hurdles to compliance and promote the use and adoption of the GIPS standards. Survey on retail and pooled products conducted. Pooled Funds Working Group formed and currently drafting guidance CFA stitute 11

12 6.0 EDUCATE provide on-going educational materials and training 6.1 Maintain and develop the GIPS standards website as an educational resource. 6.2 Develop focused educational materials for marketing and sales professionals, and RFP teams. 6.3 Develop plan for providing education and resources for Country Sponsors and asset owners. Status Remarks Reorganization and enhancements in process. Priority 2 United States Country Sponsor developed two papers: Best Practices for Creating and Maintaining Policies and Procedures for Complying with the GIPS standards and Performance Advertising Reconciling the GIPS standards with the vestment Advisors Act of 1940 and both these papers have been reviewed by the Executive Committee and posted on the GIPS standards website as a resource. Model RFP Template specific to GIPS standards created and widely distributed. Priority 2 Request GIPS Promotion & Awareness and vestor/consultant Subcommittees to collaborate to develop a plan to provide education and resources for Country Sponsors and assets owners. - Model RFP Template specific to GIPS standards created and widely distributed. - New PowerPoint presentation created in collaboration with vestor/consultant and Promotion & Awareness Subcommittees GIPS Mission and Vision A Road Map has been posted on the GIPS website CFA stitute 12

13 6.4 Develop plan and educational resources to address perceived violations of the GIPS standards. Status 2013 Remarks Priority Develop webcasts to provide educational opportunities to the industry. Topics include: -Becoming Compliant; -Real Estate; -Private Equity; -Wrap fee/sma; and -Verification. queue Priority 3 A set of short webcasts were recorded in October 2012 and posted on the GIPS website in February 2013 titled What vestors Need to Know About the GIPS Standards 20 short interviews on various topics were recorded at the September 2013 GIPS Standards Annual Conference and will be finalized soon 2012 CFA stitute 13

14 Completed Revise the various Guidance Statements for all the changes and additions to the 2010 edition of the GIPS standards. Revise the GIPS Standards Handbook to address changes and additions to the 2010 edition of the GIPS standards. Develop guidance on alternative investment strategies and structures. Explore development of a Code of Conduct for GIPS Service Providers Status Remarks 2011 Completed Approval of Performance Examination Guidance Statement by the GIPS Executive Committee in March 2012 the last Guidance Statement requiring revision Completed Published and posted on GIPS website in January Completed Approved by the GIPS Executive Committee on 18 May Deleted (added at the EC Brussels -Person Meeting in March 2012; deleted at the EC Charlottesville Meeting in October 2012) 2012 CFA stitute 14