One of the most confusing areas of GIPS(R) (Global Investment Performance Standards) is “supplemental information.” Since firms are required to label this information, it’s important to know what it is. In essence, it’s any performance-related information that accompanies a GIPS presentation that is neither required nor recommended. For example, attribution results aren’t required nor are they recommended, and so if a compliant firm decides to include an attribution report with their presentation, it would be considered “supplemental.”

A colleague asked whether net-of-fee returns are supplemental. I must admit that I found the question to be a bit odd, but there actually is some logic to how this is arrived at. Paragraph 5.B.1 of the 2010 edition recommends that firms show gross-of-fee; it doesn’t recommend net. Does this mean that net must be supplemental, since it’s neither required nor recommended? In reality, the standards permit either and often refer to both (see, for example, ¶ 4.A.5 and ¶ 4.A.6).

While I can see the logic behind the question, there seems to be evidence that net-of-fee returns are not supplemental. I often suggest to clients that they use the sample presentations in the standards as templates for their use; and if we look at Appendix A (page 46) of the 2010 edition we find a sample that shows both gross- and net-of-fee returns. If net-of-fee were supplemental, it would be so indicated here.

The requirement is that firms must show either net- or gross-of-fee returns; they can show both or either. Neither is supplemental.