Library/CFA (Chartered Financial Analyst)/Ethical and Professional Standards — CFA Program Curriculum, 2026 • Level I • Volume 10/Learning Module 4 Introduction to the Global Investment Performance Standards (GIPS)

Learning Module 4 Introduction to the Global Investment Performance Standards (GIPS)

50 questions available

Take a quiz Listen to a podcast

Purpose and Scope of the GIPS Standards5 min

The Global Investment Performance Standards (GIPS) are practitioner-driven ethical standards that promote fair representation and full disclosure in investment performance reporting. They were created to improve comparability and integrity of performance information across firms and jurisdictions by eliminating abusive practices such as cherry-picking representative accounts, survivorship bias, and selective time-period reporting. Any firm that manages actual assets may claim compliance; consultants may not claim compliance unless they manage the assets in question, and software vendors cannot claim compliance. Compliance is a firm-wide, voluntary process: a firm either fully complies and may use the GIPS Compliance Statement, or it does not claim compliance.

Key Points

GIPS aim for fair representation and full disclosure in performance reporting.
Designed to prevent representative accounts, survivorship bias, and selective periods.
Only asset-managing firms (and asset owners) may claim compliance; software cannot.
Compliance is voluntary and must be firm-wide (full or none).

Composites and Firm Definitions5 min

Key concepts for firms include composites, the firm definition, and discretion. Composites aggregate all actual, fee-paying, discretionary portfolios that are managed according to a similar mandate, objective, or strategy; pooled funds must be included in composites they meet the definition for; composite membership decisions must be made on an ex ante basis to avoid cherry-picking. The firm definition should be the broadest, most meaningful definition, including geographical offices under the same brand. The firm must define its standard for discretion: if client-imposed restrictions prevent implementation of the intended strategy, the portfolio is non-discretionary and must not be included in composites.

Key Points

A composite groups portfolios with the same mandate, objective, or strategy.
All actual, fee-paying, discretionary accounts must be included in at least one composite.
Composite inclusion decisions must be pre-defined (ex ante) to prevent cherry-picking.
Define the firm broadly; define discretion so restricted portfolios are excluded.

Fundamentals of Compliance and Verification5 min

Fundamentals of compliance include adherence to applicable law, clear policies and procedures, accurate input data, and consistent calculation methodologies; recommendations are provided to achieve best practice beyond minimum requirements. Verification is an independent, third-party, firm-wide review that provides assurance that a firm’s policies, procedures, and processes for maintaining composites and calculating and presenting performance are designed and implemented in accordance with the GIPS standards. Verification does not certify the accuracy of any single composite presentation and is optional but recommended; a firm cannot self-verify. The GIPS Standards continue to evolve and include guidance, interpretations, and Q&As that firms must follow. Firms claiming compliance should maintain documentation, disclose necessary information in GIPS Reports and be prepared for due diligence by prospective clients and verifiers.

Key Points

Compliance requires properly defined policies, accurate data, and consistent calculations.
Verification is optional, independent, firm-wide, and does not validate individual composites.
A firm cannot self-verify; verifiers are independent third parties.
GIPS includes Guidance, interpretations, and Q&As that are authoritative for firms.

Questions

Question 1

What primary objective do the GIPS standards serve for investment firms and investors?

Learning Module 4 Introduction to the Global Investment Performance Standards (GIPS)

Questions

Other chapters