While more than 1,600 organizations, including the top 25 asset managers, claim compliance with the Global Investment Performance Standards (GIPS), sizable industry segments remain outside the fold. Recent and pending adjustments in the framework are designed to close those gaps.
Efforts by the CFA Institute, which has been responsible for the performance-presentation and -reporting program in its current form since the late 1990s, include a trade-error guidance statement and a paper on considerations for trade-error policies. At the most recent GIPS annual conference in November, the institute opened a comment period on new best practices for return attribution reporting.
In a post-conference update, ACA Group noted “important changes” which have since taken effect: a Guidance Statement for Outsourced Chief Investment Officer (OCIO) Portfolios; Verifier Standards for asset owners and fiduciary management providers (FMPs) to U.K. pension schemes, reinforcing independence and disclosure principles; and Composites for FMPs.
Julia Reyes, ACA Performance Services
Julia Reyes, partner, ACA Performance Services, said GIPS continues to grow as new firms seek to apply standardized processes performance calculations.
“More firms are going into distribution channels that they haven't necessarily been in before, or markets that they haven't been in before, and they just lack the expertise or the bandwidth to take on new operational requirements of those asset classes or distribution channels,” Reyes commented. “We've been able to step in and help them out with that.”
That help extends to guidance on Securities and Exchange Commission marketing rules and determining after-tax performance, according to Reyes.
CFA Institute has been “hyper focused” over the last year, Reyes said, “on certain segments of the market where maybe the GIPS standards were not a perfect fit, and creating specific guidance for them. It’s been beneficial in that now those segments have something very tailored towards them with a good understanding of how that part of the market operates.”
Sean Gilligan, Longs Peak Advisory Services
GIPS compliance has not been a high priority for alternative asset managers, even when they are hired by large funds, according to Sean Gilligan, founder and managing partner at Longs Peak Advisory Services.
“The managers don't want to become compliant if they're not required to, and the asset owners don’t seem to want to require them, because they don’t want to restrict who they go after or who they’re allowed to hire,” said Gilligan. “They don’t want to make it a strict rule, so it's just one of those things that became the norm for traditional managers.”
OCIOs are being targeted as they have become increasingly popular with pension funds. They are third-party fiduciaries who provide investment advice and management services and can make investment decisions for clients who delegate to them.
The guidance on composites, cash flows and model investment fees must be adhered to by firms following GIPS. The changes are related in part to new SEC Marketing Rule guidance. Per a March 2025 update to Marketing Compliance FAQs, as long as investment advisors do not present portfolio performance in a misleading way, the regulator would not pursue enforcement actions.
Under GIPS, investment firms can set minimum asset amounts for portfolios to be included in composites, which are portfolios under a specific mandate, objective or strategy. These have to be at least the minimum amount to implement a desired strategy.
However, composite minimums can be tricky to apply. Of firms with over $10 billion assets, 60% use them, according to an ACA Group white paper. That increased 23% since 2021.
Firms have been moving away from implementing significant cash flows, which signify the level where client-directed cash flow makes a portfolio temporarily non-discretionary, since 2021. About 30% of firms still use this method.
Source: ACA
“As the firm increases in size, we see a steady increase in the use of model fees as opposed to actual,” says the ACA paper. “For those firms that manage over $10 billion, 34% use actual fees to calculate net composite returns as compared to 53% during the 2021 research. We also noted that 56% now use only model fees or a combination of actual and model fees, compared to 44%” in 2021.
Model fees, however, are popular for calculating wrap composite net returns. Among ACA’s clients managing wrap accounts, the use of model fees for this purpose increased by 22%, to reach 60%, according to ACA. And 70% of firms over $10 billion are using them to calculate these returns – up 12% since 2021.
Also, the use of annualized composite and benchmark returns in GIPS Reports increased 15% since 2021, to reach 37% of firms.
While the SEC did in recent months address advisors’ due diligence and disclosure requirements and how firms may compensate clients for testimonials or endorsements, the GIPS standards update provides more guidance for how investment firms measure and portray portfolio performance. CFA Institute thereby stepped in where the SEC was not being specific about regulatory details, other than pronouncing what practices would hypothetically be acceptable.
The GIPS was comprehensively revised in 2020, and the 2025 changes were relatively small. Gilligan says it is an open question whether there will be another comprehensive revision in 2030.
The number of GIPS-compliant firms has not changed dramatically, according to Gilligan, who serves on the CFA Institute’s GIPS Technical Committee. Some private credit, private equity and real estate investment firms have signed on. Compliance can be a tougher sell than initiatives based on market demand, he observed.
“The compliance benefit is always there,” he added. “It’s better to have the documented policies and procedures and be organized and consistent in how you calculate and present the performance, but it’s just hard to motivate them to spend the time and money when it’s not helping them actually bring in more investors.”