Performance presentation standards have existed for more than 20 years now. First introduced by the Financial Analysts Federation in the mid 1980s, later taken up by the Association for Investment Management & Research, and now championed by the CFA Institute, the notion of a “standard” for firms to “present” their performance to “prospective clients” has been widely accepted. And, over this time, the idea of a plan sponsor complying has been questioned, criticized, and, most recently, memorialized.

The questioning has been general, the criticism in the form of at least one article (in Pensions & Investments, which I rebutted), and memorialized in the recent unveiling of draft guidance.

While the Standards have been for firms that manage $£¥€, etc. for others, we’ve seen increased interest in plan sponsors wishing to comply. Why would such entities choose to comply? Because the Standards are “best practice,” and virtually everyone should, when possible, strive to adopt best practices, yes?

When I was a member of the USIPC, we drafted guidance, which apparently has now been broadened and incorporated into this document. And, we recommended using the term “plan sponsor” to embody any asset owner (e.g., pension funds, endowments, foundations, family offices, government agencies), rather than the more traditionally limiting term. Glad to see that it is still being used this way.

The guidance doesn’t introduce anything new, at least as far as rules, but does show how many of the terms apply to plan sponsors, and clarifies what parts of the Standards a plan sponsor needs to be conscious of.

Perhaps most importantly, it recommends the use of money-weighted returns (in addition to time-weighted), to reflect the impact of cash flows, and thus, report the returns of the asset owners. Nice!

Please take the moment to review the document and offer your comments (mine were sent in last week!). We have seen interest in compliance, and count a few such entities as verification clients.