Performance Perspectives Blog

Performance Examinations: one more time, they’re usually a waste of money

by | Jul 28, 2015


Neminem id agere ut ex alterius praedetur inscitia

[No one should prey on another’s ignorance]

No, I’m not showing off my knowledge of Latin (although learning it should be added to my “bucket list”). This line comes from the 16th century French philosopher, Michel De Montaigne. I’m reading his essays, and when I came upon it was immediately struck by its applicability to GIPS(R) (Global Investment Performance Standards) optional performance examinations. For quite some time, our firm has been a critic of such reviews, as we strongly believe that they’re generally (though not always) a waste of your money.

Our verification client list is around 200, and we do conduct performance examinations, but for only a very small group of our clients. Many of our clients came to us from other verifiers, and previously had performance examinations conducted: we talked most out of continuing. Now, why would we do that?

Simple answer: We don’t believe performance examinations have value; at least in most cases.

Think about this: IF they were so valuable, then why aren’t most of our clients having them done? Or, for that matter, why aren’t the ones who had them done and stopped not now asking for them?

Please don’t get me wrong: we like to do them, since they add to our bottom line (we are a for-profit company; at least that’s what I tell our accountant). But we believe they’re not of value, and so would feel guilty to take someone’s money when they’re not getting any value for it. Call it “Catholic guilt.” Whatever!

As should be obvious to you by now, we’re into educating our clients, prospects, and the industry at large. We do this in ways in which we get compensated (training, conferences, forums, The Journal of Performance Measurement (R)), but also in complimentary ways (this blog, John Simpson’s blog, our newsletters, our videos, and much more). We believe educating our clients and prospects about the benefits of compliance and verification is important, but that it’s also important to educate them about the questionable value of performance examinations.

If you find they’re of value, great! As I mentioned above, some of our clients do, in fact, have them done. And so, clearly they do find value.

As always, your thoughts, reactions, insights, etc. are invited and welcome.

Note: I hope you’ll agree that a verifier who convinces their client to have all their composites examined, even the “non-marketed” ones, is hardly doing their clients a favor, but are, instead, preying on their ignorance. Sadly, some of our clients were paying tens of thousands of dollars each year to have all their composites examined. I happen to believe that a verifier who conducts business this way is doing an injustice to their clients and is behaving in a shameful manner. I know these are strong words, but I believe this to be the case.
Note: I’ve provided links above to our Performance Perspectives newsletter and Performance Measurement Forum. We also have a client-only newsletter and host an asset-manager’s membership group: Asset Owner Roundtable.


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