CFA L1 / Ethics / M4. GIPS
Module 4 · Ethics & Professional Standards

Introduction to Global Investment Performance Standards (GIPS)

EN: Why GIPS, who can claim compliance, composite construction.
VN: Mục đích GIPS, ai có thể tuyên bố tuân thủ, cấu trúc composite.

1. Why GIPS Exists Concept

  • Comparability Standardized performance presentation across firms and jurisdictions.
  • Transparency Full disclosure of methodology and assumptions.
  • Trust Reduces selective reporting / cherry-picking.
  • Voluntary Self-regulation; firms claim compliance — verification is recommended but optional.

2. Who Can Claim Compliance Concept

  • Firm-wide An entire investment firm — not a product or individual portfolio.
  • All-or-nothing If a firm complies, ALL fee-paying discretionary portfolios must be in composites.
  • Min. history 5 years (or since inception); build to 10.

3. Composite Construction Concept

  • Composite Aggregation of one or more portfolios managed under a similar strategy.
  • All in All actual fee-paying discretionary portfolios in at least one composite.
  • Time-weighted TWR is the required return measure (since fund manager doesn't control client cash flows).
  • Compliance statement Specific wording required.

4. Sections of GIPS Concept

  • Sec. 0 Fundamentals of compliance.
  • Sec. 1 Input data.
  • Sec. 2 Calculation methodology.
  • Sec. 3 Composite construction.
  • Sec. 4 Disclosures.
  • Sec. 5 Presentation and reporting.
  • Sec. 6 Real estate.
  • Sec. 7 Private equity.
  • Sec. 8 Wrap fee / SMA.

Practice problem Practice

Practice problem

A firm wants to claim GIPS compliance but has only 4 years of performance history. Can it claim compliance?

Show solution
Minimum 5 years required (or since inception if newer).
If less than 5 years, present full history since inception.
Build to 10 years over time.
Present 4 years (since inception); claim is allowed for inception-to-date.