The CFA Institute’s 28^th Annual Global Investment Performance Standards (GIPS) Conference was held in San Diego, CA on September 17-18. One of the highlights of attending is the chance to reconnect with colleagues, industry contacts, and old friends. I find the real value in the relationships strengthened and conversations sparked during the event. Networking and catching up with fellow professionals are what makes the conference so rewarding, and it’s always refreshing to exchange ideas and discuss the latest trends with peers in the field. I would like to thank the speakers who participated in the panels and shared their valuable insights. Here are a few key takeaways from this year’s conference:

1. Ongoing Discussions on the SEC Marketing Rule

Firms and professionals are still adapting and debating the rule’s implications on investment performance advertising. The following points were made by two SEC panelists:

• Tend to see contribution as performance, not attribution.
• When presenting net and gross returns for private funds, both must be calculated the same way – e.g., you are not allowed to report a gross return that excludes a subscription line of credit and then a net return that includes it. You must disclose the effect of leverage, and it must specify what the drag will be when using subscription lines of credit; you cannot simply state that the return will be lower.
• Carve-outs vs. Extracted Performance. Hypothetical performance is “performance that no specific account received”, and firms must be ready to defend why they’ve classified performance as hypothetical or extracted, as applicable.
• An unclear response with respect to performance of funds/investments not previously held: is it hypothetical?
• Presenting more than one net return stream is acceptable.
• The model fee used to calculate net returns should be the highest fee, specifically stating it should not be the average.
• Recommend including a benchmark.

Additionally, per a CFAI panelist, when netting down sector returns, you must deduct from each sector the pro rata monthly rate, you cannot allocate the monthly rate according to each sector’s market value.

2. AI in Investment Performance Reporting

The adoption of AI in performance measurement, reporting, and auditing will “shift the role of the human.” Jobs focused on data gathering, linking, and cleaning will be the first roles to be replaced by AI. However, the audit function and training AI will be human for quite some time.

3. Updates on the GIPS Standards

Attendees were introduced to recent updates in GIPS guidelines, particularly those affecting OCIOs – the Guidance Statement for OCIO Strategies will be released by year-end – and BDPFs – the Guidance Statement on Firms Managing Only BDPFs was effective July 1, 2024. It was indicated that the GIPS Technical Committee will be forming a working group to tackle the subject of after-tax reporting. For now, they recommend you refer to the USIPC After-Tax Performance Standards, which were issued in 2011. Also, since they believe there is little consensus on how to calculate private fund returns, they plan to provide guidance on this subject – “hopefully.”

These insights highlight the evolving landscape of investment performance reporting and the crucial role that a mastery of the domestic regulatory requirements and the GIPS standards plays in ensuring transparency and consistency in the financial industry.

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