Performance Perspectives Blog

Did you fill out the GIPS survey, yet?

by | Oct 14, 2016


GIPS Survey Time

The GIPS(R) Executive Committee has posted a survey here, and they’d like your input. The survey will only take you a few minutes.

One question they ask is what changes you’d make to the Standards. I offered three:

  1. Change the composite return from an asset-weighted one to an equal-weighted one. This was a controversial subject back in the pre-AIMR-PPS(R) days, but hasn’t been an issue since. That said, it should be, since the returns of larger accounts have a greater influence on the results when you asset-weight: why should they? Why not a true average? Anyway, my belief (shared my others, too); don’t expect it to go anywhere.
  2. Eliminate the aggregate method for composite returns (or at least recommend against it). It produces something other than the average of the underlying accounts: it gives the return of the composite. No one manages the composite. Firms manage the accounts within the composite. I don’t expect this to occur, either, but I was asked, and so, I give my opinion.
  3. Require the use of the Internal Rate of Return for ALL strategies where the manager controls the cash flows, regardless of the asset class or whether the plan/partnership is open or closed ended. We use the IRR to measure the return of managers who control the cash flows. Why have a complicated set of rules for its use. I know that the GIPS EC is looking into broadening the role of the IRR: this is one they should consider!

Off hand, I don’t know for how much longer the GIPS survey will remain, but please take a moment and fill it out: it’s confidential! That said, if you’re going to write some of your answers in a blog post (or newsletter) as I have, you kind of lose your confidentiality … but in a knowing way.

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