EMEA RIPS Minutes 9 Page 1 MINUTES EMEA RIPS Friday 9 London, England DATE: Friday 9 TIME: CHAIR: 9:00 a.m. 3:00 p.m. Dimitri Senik, CFA COUNTRY SPONSOR ATTENDEES: Dmitrij Alexandrov Russia Miguel Mora, CIPM Spain Jonas Arsjo Sweden Colin Morrison United Kingdom Adrian Doswald Liechtenstein Sunette Mulder South Africa Erwin Jager, CFA, CIPM The Netherlands Chris Muyldermans Belgium* Stefan Illmer Switzerland Martin Schliemann Germany Jørn Gunnar Kleven Norway Michael Schmid Austria Carolyn Linnevers Luxembourg COUNTRY SPONSOR ATTENDEES ABSENT: Denmark France Greece Hungary Ireland Italy Kazakhstan Portugal Ukraine ASSOCIATE MEMBER ATTENDEES: Chris Muyldermans EFAMA* Claudia Stinnes - EFFAS ASSOCIATE MEMBER ATTENDEES ABSENT: EFRP OBSERVERS: Jonathan Boersma, CFA Institute GIPS Executive Director Brian Chapman United Kingdom Helen Forrest United Kingdom Tony Hanlon United Kingdom Susanne Klemm Switzerland Yoko Murakami Lunden United Kingdom Mabs Miah United Kingdom Stewart Morris United Kingdom Hans Pieper Germany Christopher Race United Kingdom Damian Regan, ASIP United Kingdom Leonie Woodward United Kingdom
EMEA RIPS Minutes 9 Page 2 CFA INSTITUTE: Cindy Kent Director, Global Investment Performance Standards Iain McAra Director, Global Investment Performance Standards * Serving as Country Sponsor representative and Associate Member representative. Action Items: 1. EMEA RIPS members agreed to ask the GIPS Promotion & Awareness Subcommittee to provide supporting materials to promote the GIPS awareness among asset owners. 2. Each EMEA RIPS Country Sponsor is asked to reach out to regulators, plan sponsors, and other asset owners in their local markets to increase their awareness of the benefits of the GIPS standards within the next 12 months. 3. CFA Institute staff to distribute to EMEA RIPS Country Sponsors The Value of GIPS Compliance: 2012 Manager and Consultant Survey published in May 2012 by ACA Compliance Group and evestment Alliance. 4. CFA Institute staff to distribute the GIPS Model RFP Template to EMEA RIPS Country Sponsors. 5. Martin Schliemann to create a document to circulate to GIPS Council members explaining the issues and proposal not to hold an in-person GIPS Council meeting in March 2013. The document will ask for Country Sponsor feedback specifically on two questions: Are there topics/items that require GIPS Council input; and How should the GIPS Council be structured. 6. EMEA RIPS Country Sponsors are requested to provide feedback and input to the document circulated by Martin Schliemann as GIPS Council Chair. Decision Items: A. The EMEA RIPS Minutes of 15 March 2012 in Brussels were approved unanimously, as presented. B. EMEA RIPS members unanimously approved the proposal to hold a GIPS Council conference call in March in conjunction with the EMEA RIPS in-person meeting. C. EMEA RIPS members voted unanimously to create a working group, reporting to EMEA RIPS, to address the GIPS Strategic Plan item #1.10 to Review and Update Guidance Statement on Fees to include guidance on reflecting performance based fees, netting of expenses, bundled fees, and calculating net returns, and to submit a proposal to create this working group to the GIPS Executive Committee for approval. Leonie Woodward will Chair this group and both Colin Morrison and Dimitri Senik agreed to work on this project. Country Sponsor are asked to submit volunteers from their local committees. 1. Welcome / Introductions / Opening Remarks Mr. Senik welcomed all attending EMEA RIPS Country Sponsors, and Observers. He expressed his gratitude to the United Kingdom Country Sponsor for hosting the EMEA RIPS in-person meeting in London and thanked StatPro and Ernst & Young for sponsoring the Country Sponsor dinner on Thursday evening. 2. Approve Minutes of the EMEA RIPS Meeting 15 March 2012 The EMEA RIPS Minutes of 15 March 2012 in Brussels were approved unanimously, as presented. o Review action items of the EMEA RIPS in-person meeting on 15 March 2012: The action items from the last EMEA RIPS meeting were reviewed and the following action items were updated and/or identified as still open: -EMEA RIPS members have reviewed the GIPS Strategic Plan and identified areas of interest that will be discussed later in this meeting -The EMEA RIPS Regulator Relations Working Group has been formed and held its first meeting earlier today and an update will be provided later in this meeting 3. Update on GIPS Executive Committee Activities Since 15 March 2012
EMEA RIPS Minutes 9 Page 3 It was reported that: o CFA Society of Mexico has been endorsed as the 35 th GIPS Country Sponsor o GIPS Executive Committee approved Guidance Statements on Performance Examinations, Real Estate, Alternative Investment Strategies and Structures o GIPS Executive Committee approved the German translation of the 2010 edition of the GIPS standards. o The Japan Country Sponsor translated GIPS Guidance Statements on Calculation Methodology, Treatment of Significant Cash Flows and Verification and the GIPS EC has approved these three translations. o GIPS Executive Committee met in-person in Charlottesville in October and approved Terms of References for three Working Groups: Private Equity, Real Estate and Risk o At the in-person meeting, the GIPS Executive Committee reviewed the draft Guidance Statement on Applying the GIPS Standards to Plan Sponsors, Endowments, Foundations and Other Similar Entities. After incorporating EC feedback, this draft guidance will be revised and presented to the EC for further review in late 2012 with a public comment period in early 2013. o The Performance Portability Guidance Statement is being revised by the USIPC and the Interpretations Subcommittee, and a revised draft is expected to be provided to the Executive Committee by the end of 2012. There will most likely be a public comment period for this GS. o Guidance Statement on Verifier Independence is still being revised. o GIPS Executive Committee approved the revised GIPS Standards Handbook as amended and it is due to be released in the next weeks. o The Retail/Pooled Funds Working Group is being formed. The working group will be chaired by Ann Putallaz, Chair of the RIPS Americas. o Currency Overlay Working Group will be chaired by Dimitri Senik and four GIPS Executive Committee members will work on initial draft. o The Regulator Relations Working Group Terms of Reference has been approved by the GIPS Executive Committee o GIPS Strategic Plan has been reviewed, revised and updated o The GIPS Executive Committee is continuing to discuss and review governance matters, including the GIPS Council o The GIPS Executive Committee is considering how to collect GIPS compliance rates globally and debating whether to ask firms to register and/or request Country Sponsors to collect compliance data o The GIPS logo will be changing in conjunction with the branding adopted by CFA Institute, and the GIPS website has already changed. o Mr. Senik reported only one nominee was put forward by GIPS Country Sponsors to serve as the GIPS Council representative on the GIPS Nominations Committee. There were no nominees from EMEA RIPS. The election closed on 1 November and an announcement will be made soon. o The next GIPS Executive Committee closed in-person meeting will be held in Washington, D.C. on 30 November in conjunction with an Advocacy Summit hosted by CFA Institute. The GIPS Executive Committee meetings in Europe will be 13-15 March 2013 in Brussels and the next EMEA RIPS meeting will be 14 March 2013 in the afternoon. 4. Outreach to Asset Owners Mr. Senik expressed concern about asset owners interest in the GIPS standards and stated his observation that the awareness of pension funds of the benefits of GIPS compliance of their asset managers is declining. He suggests that GIPS Promotion & Awareness Subcommittee focus on increasing awareness of GIPS standards to asset owners. EMEA RIPS members agreed to directly appeal to assets owners through the GIPS Promotion & Awareness Subcommittee and suggested the development of back to basics materials (i.e., what is a composite, what does GIPS in practice look like, benefits of GIPS compliance and value added and to make marketing materials more appealing.) Mr. Schliemann noted that Country Sponsor interest also appears to be waning and that is troubling.
EMEA RIPS Minutes 9 Page 4 Dr. Illmer complimented the development of the GIPS Model RFP Template document that was distributed at the meeting and suggested a marketing plan for wider distribution. It was requested that CFA Institute staff distribute the GIPS Model RFP Template to EMEA RIPS members and all GIPS Country Sponsors. Mr. Morrison reports that 90% of UK firms are GIPS compliant. Ms. Mulder commented that maintaining and promoting the GIPS standards would be good corporate governance for an organization. Mr. Senik asked each EMEA RIPS Country Sponsor to take the action item to reach out to regulators, plan sponsors, and other asset owners in their local markets to specifically discuss the benefits of the GIPS standards. The EMEA RIPS members voted unanimously to actively conduct this outreach. Mr. Boersma mentioned the recent consultant survey conducted by ACA Compliance Group and evestment Alliance that showed consultants are consistently targeting investment firms that claim GIPS compliance. CFA Institute staff will distribute to EMEA RIPS Country Sponsors The Value of GIPS Compliance: 2012 Manager and Consultant Survey published in May 2012 by ACA Compliance Group and evestment Alliance. Mr. Schliemann requested Country Sponsor feedback regarding the GIPS Council. Mr. Boersma noted that the GIPS Council has not historically acted as a technical forum, but more of a political forum. Mr. Boersma explained the cost is very expensive to bring all Country Sponsors together and as more Country Sponsors join the GIPS family we need to be mindful of the expense for Asia Pacific Country Sponsors to travel to Europe for the GIPS Council meetings. There was a lengthy discussion that the RIPS historically have had more lively, productive meetings. It was noted that there is a need for in-person meetings for technical subcommittees and an obligation to be mindful of appropriate budget allocation for effective GIPS in-person meetings. Mr. Boersma suggested not holding an in-person GIPS Council meeting in March 2013. To keep the GIPS Council, Country Sponsors must react, provide feedback and there is a need for more communication both from Country Sponsors and the Executive Committee. Mr. Schliemann agreed Country Sponsors need to become more involved. An action item was assigned to Mr. Schliemann to create a document to circulate to GIPS Council members explaining the issues and the proposal not to hold an in-person GIPS Council meeting in March 2013. The document will ask for Country Sponsor feedback specifically on two questions: Are there topics/items that require GIPS Council input; and How should the GIPS Council be structured. All Country Sponsors will be requested to provide input and feedback to Mr. Schliemann s document. EMEA RIPS members unanimously approved the proposal to hold a GIPS Council conference call in March 2013 in conjunction with the EMEA RIPS in-person meeting.
EMEA RIPS Minutes 9 Page 5 5. Presentation by Financial Services Authority Mr. Tony Hanlon, Manager of the Financial Services Authority s Asset Manager Sector Team, gave a presentation and provided an overview of the Financial Services Authority. He explained that the policy, single market philosophy and approach are similar to the U.S. market. Highlights included: - Alternative investment enforcement to commence next year - Regulations are being driven at the pan-european level; Parliament and ESMA are drivers to UK regulations - 2008 financial crisis led to major regulations - Current changes flowing the UK regulations are to prevent customer detriment, focus on wholesale and retail investors. Mr. Hanlon suggests following the latest developments and upcoming initiatives on their website. Following Mr. Hanlon s presentation several questions were raised by the EMEA RIPS members, including the position of FSA if a firm falsely claims GIPS compliance. Mr. Hanlon responded that firms are required to operate in open, fair, honest manner and that action could be taken on that basis, as a disclosure issue. 6. GIPS Strategic Plan 2015 Mr. Boersma provided a brief review of the GIPS EC Strategic Plan for 2015 and the top five priorities of the Plan: 1. Pooled Fund and Retail Products; 2. Risk Guidance; 3. Update Supplemental Information Guidance Statement; 4. Guidance on Overlay Assets; and 5. Update/Expand Performance Record Portability Guidance Statement. Mr. Boersma highlighted the dates projected for the initiatives to be completed and explained the remarks are provided as examples of tasks completed to support the initiative. Mr. Boersma provided an overview of the need to collect data on firms that claim compliance with the GIPS standards and that a proposal will be developed for consideration and information will be shared with Country Sponsors. There was agreement and understanding that some Country Sponsors are not able to solicit or provide statistics on GIPS compliance in their country/local markets. It was mentioned that the topic of verifier oversight was discussed by the Executive Committee at their recent meeting in Charlottesville and more detail will be forthcoming. Mr. Boersma reported that organizations in Turkey and Czech have recently requested information regarding the GIPS Country Sponsor application process. Mr. Senik reported that feedback was submitted by thirteen EMEA RIPS Country Sponsors regarding items on the GIPS Strategic Plan that they consider a priority and would to pursue. He reviewed the top five strategic initiatives targeted by EMEA RIPS: 1.10 Review and Update Guidance Statement on Fees 1.16 Review and Update Guidance Statement on Composite Definition 1.11 Review and Update Advertising Guidelines 1.15 Develop guidance on internal rate of return (IRR) 1.17 Develop guidance on defining materiality
EMEA RIPS Minutes 9 Page 6 Mr. Senik also mentioned that another initiative targeted by EMEA RIPS is 1.9 to develop guidance on overlay strategies. A working group has been defined to address overlay strategies and will report to the Interpretations Subcommittee, and Mr. Senik will serve as the chair. After discussion, EMEA RIPS members voted unanimously to create a group, reporting to the EMEA RIPS, to address the GIPS Strategic Plan item #1.10 to Review and Update Guidance Statement on Fees to include guidance on reflecting performance based fees, netting of expenses, bundled fees, and calculating net returns, and to submit a proposal to create this working group to the GIPS Executive Committee for approval Leonie Woodward will Chair this group and both Colin Morrison and Dimitri Senik agreed to work on this project. EMEA RIPS Country Sponsor representatives will ask for volunteers from their local committees. 7. Update from Interpretations Subcommittee Performance Record Portability Guidance Statement Mr. McAra reported he Portability Guidance Statement was drafted by the USIPC originally and have been submitted to the Interpretations Subcommittee for review and feedback. The issues of grace periods and owning track records are quite complex and the USIPC will revise the guidance based on the input received. Plan Sponsor Guidance Statement The update on this guidance was reviewed earlier as part of the GIPS Executive Committee update. Q&As Update There are outstanding Q&As on real estate, performance examination and verifier independence that the Interpretations Subcommittee will review. GIPS Standards Handbook The Handbook has been finalized, is currently being published and will be available electronically on the GIPS website. 8. Update from Risk Working Group Mr. Morrison reported that the draft Guidance Statement on Risk is progressing and will include selecting appropriate risk measures. He mentioned that the topic of leverage and derivatives must be addressed. 9. Update from Promotion & Awareness Subcommittee Mr. Mora provided an overview of GIPS Promotion & Awareness Subcommittee projects: - Compliance education and how to deal with suspicious claims of GIPS compliance - Model RFP Template development - Revised presentation on GIPS Mission and Vision - Internet and social media; specifically how to detect/correct misrepresentation on GIPS issues - Discussing SharePoint as a resource for Country Sponsors Mr. Mora welcomed ideas on how GIPS Promotion & Awareness Subcommittee can support the RIPS with marketing, educational materials. 10. Update from Regulator Relations Working Group Mr. Morrison reviewed that the working group met earlier today. In reviewing the ESMA 2012 Work Programme, he reported there are no issues or topics related to investment performance. Mr. Morrison stressed the need for GIPS awareness and education. He stated the goal is avoid regulatory conflicts with the GIPS standards, not to include GIPS standards into regulation.
EMEA RIPS Minutes 9 Page 7 Ms. Muyldermans discussed the need for Country Sponsors to interact with local regulators and the need to engage. The working group will continue discussing the next steps and will provide update at the next EMEA RIPS meeting. 11. Country Sponsor Activity Update Germany will host another annual German Day and requested that Iain McAra provide a presentation. 12. Other Business The next EMEA RIPS meeting is scheduled for 14 March 2013, in the afternoon, in Brussels. Ms. Stinnes will update the EFFAS Board on this meeting and activities of EMEA RIPS. She will ask for interest by any EFFAS Society to host the November 2013 EMEA RIPS meeting. Adjourned