What Is GIPS Compliance? A Plain-English Guide for Investment Firms
by Christopher Spaulding, TSG
Of the top 25 global investment management firms, every single one claims compliance with the GIPS standards. Among the top 100, 86 do. Across the industry, 1,668 organizations in 54 markets have made the same commitment. If your firm competes for institutional assets and is not among them, you are starting at a disadvantage.
GIPS stands for the Global Investment Performance Standards, and “GIPS compliance” means a firm has adopted these standards to calculate and present its investment performance. But what exactly do the standards require? Who needs to comply? And what is the difference between compliance and verification?
This guide answers those questions in plain English, whether you are an investment manager exploring compliance, a compliance officer building a case internally, or an asset owner evaluating managers.
What Are the GIPS Standards?
The GIPS standards are a set of globally recognized, industry-accepted rules for how investment firms should calculate and present their performance history. They are administered by CFA Institute, the same organization behind the CFA charter. (GIPS is a registered trademark of CFA Institute.)
The standards were created to solve a real problem: before GIPS, there was no consistent way to compare one firm’s track record to another’s. Firms could cherry-pick their best accounts, use inconsistent calculation methods, or omit unfavorable results. Investors had no reliable way to tell.
GIPS introduced a common framework built on two principles: fair representation and full disclosure. When a firm claims GIPS compliance, it is telling the market: “We follow a globally standardized methodology, and we are transparent about how our numbers are calculated.”
The current edition is the 2020 GIPS Standards, effective January 1, 2020. These standards apply to all types of investment firms, including traditional asset managers, hedge funds, private equity, real estate, OCIOs, and credit managers. A new Guidance Statement for OCIO Portfolios also took effect December 31, 2025, reflecting the growing importance of GIPS for outsourced investment programs.
Who Needs to Be GIPS Compliant?
Technically, no one. GIPS compliance is entirely voluntary. No regulator mandates it.
Practically, it is a different story. Institutional investors, pensions, endowments, and the consultants who advise them routinely require GIPS compliance as a baseline. Many RFPs include it as a threshold question: if you cannot check the box, your response goes no further.
The numbers confirm this. With 1,668 organizations in 54 markets currently claiming compliance, and 86 of the top 100 global firms on the list, GIPS compliance has become the standard professional expectation for any firm managing or competing for institutional assets.
Firms that should seriously consider GIPS compliance include:
- Traditional asset managers seeking institutional mandates
- Registered investment advisors (RIAs) looking to move upmarket
- Hedge funds and alternative managers competing for allocator capital
- Private equity and real estate firms with institutional investors
- OCIOs and investment consultants (especially after the new OCIO Guidance Statement)
- Asset owners who want to hold themselves to the same standard they expect of managers
Even if your firm is not yet pursuing institutional clients, GIPS compliance builds internal controls and reporting discipline that will serve you as you grow.
What Does GIPS Compliance Actually Require?
GIPS compliance is an ongoing commitment that affects how your firm defines itself, groups accounts, calculates returns, and presents results. Here are the core requirements:
Firm Definition
You must clearly define your firm as a distinct business entity. GIPS compliance is applied firm-wide. You cannot claim compliance for only a portion of your business.
Composite Construction
All fee-paying, discretionary portfolios must be included in at least one composite, which is a grouping of portfolios managed according to a similar strategy or mandate. Composites exist to prevent cherry-picking: firms cannot show only their best accounts.
Performance Calculation
Returns must be calculated using approved methodologies, typically time-weighted returns. The standards specify how to handle cash flows, fees, and other factors that affect calculations.
Required Disclosures
GIPS Reports must include specific disclosures: benchmark information, composite descriptions, fee schedules, the number and size of portfolios in each composite, and more. These disclosures ensure investors can evaluate performance in proper context.
Record Keeping and Policies
Firms must document their policies and procedures for maintaining compliance and apply them consistently. This includes policies for composite assignment, error correction, and performance presentation.
Minimum Performance Track Record
Firms must present at least five years of annual performance (or since inception if the composite is less than five years old) and build toward a ten-year track record over time.
The standards are detailed, but they are not designed to be burdensome. They are designed to ensure your performance data is accurate, complete, and comparable. [INTERNAL LINK: link to GIPS Standards 101 page or primer resource]
GIPS Compliance vs. GIPS Verification – What’s the Difference?
This is one of the most common questions firms ask, and it matters. The two terms are related but distinct.
GIPS compliance is the firm’s own claim that it follows the standards. The firm is responsible for designing, implementing, and maintaining the policies and procedures needed to meet GIPS requirements. Any firm can claim compliance without external validation.
GIPS verification is an independent review conducted by a third-party verification firm. The verifier assesses whether the firm’s composite construction complies with the standards on a firm-wide basis and whether its policies and procedures are designed to calculate and present performance in accordance with the GIPS standards.
CFA Institute recommends that all firms claiming compliance undergo verification. While it is not strictly required, most institutional investors and consultants expect it. A verified compliance claim carries significantly more credibility than an unverified one.
Here is a side-by-side comparison:
| GIPS Compliance | GIPS Verification | |
| What is it? | A firm’s self-declaration that it follows the GIPS standards in calculating and presenting performance. | An independent third-party review confirming the firm has followed GIPS requirements. |
| Who does it? | The investment firm itself. | A qualified, independent verification firm (such as TSG Performance). |
| Is it required? | Voluntary, but expected by institutional investors and consultants. | Recommended by CFA Institute. Not required, but strongly preferred by allocators. |
| What does it cover? | All composites and pooled funds firm-wide. You cannot claim partial compliance. | Firm-wide policies, procedures, and composite construction. Does not guarantee individual composite accuracy. |
| Result | The firm can state it “claims compliance” with the GIPS standards. | The firm receives a verification report it can share with clients and prospects. |
| Credibility level | Foundational. Shows commitment to ethical performance reporting. | Higher. Independent confirmation adds significant investor confidence. |
[INTERNAL LINK: link to GIPS Standards Verification page for more detail on the verification process]
What Happens During a GIPS Verification?
A GIPS verification is a structured engagement. While the scope and timeline vary by firm, the process generally follows these steps:
- Pre-engagement review: The verification firm reviews your policies, procedures, and composite definitions to understand how your firm operates.
- Data gathering: The verifier examines your books and records, including portfolio data, performance calculations, and composite membership records.
- Testing and analysis: The verifier tests whether your composites are properly constructed, your calculations follow GIPS methodology, and your presentations include all required disclosures.
- Findings and resolution: If issues are identified, the verifier works with you to resolve them. A good verification firm provides clear, actionable guidance, not just a list of problems.
- Verification report: Once satisfied, the verifier issues a verification report confirming compliance. This report can be shared with clients and prospects.
The verification is conducted firm-wide. A verifier cannot verify individual composites in isolation. The scope covers all composites and pooled funds managed by the firm during the period under review.
At TSG Performance, verifications are conducted onsite (or remotely, as appropriate) by senior-level specialists, not junior staff rotating through your account. [INTERNAL LINK: link to GIPS Standards Verification page]
The Business Case for GIPS Compliance
GIPS compliance is not just about following rules. It is a strategic advantage.
Win Institutional Mandates
Institutional investors, pensions, endowments, and sovereign wealth funds increasingly treat GIPS compliance as a prerequisite. Without it, your firm may not make the initial cut in a manager search. With it, you are competing on a level playing field with the largest firms in the world.
Strengthen RFP Responses
Consultants and allocators use standardized questionnaires that ask directly about GIPS compliance and verification status. A verified compliance claim is a clear, unambiguous answer that moves your firm forward in the evaluation process.
Build Investor Confidence
GIPS compliance tells your clients and prospects that your performance data is calculated consistently, presented fairly, and subject to professional oversight. In an industry where trust is the foundation of every relationship, that signal matters.
Improve Internal Controls
The process of achieving and maintaining compliance strengthens your operational infrastructure. Many firms find that GIPS compliance improves data quality, streamlines reporting, and reduces operational risk across the business.
Stay Ahead of Regulatory Trends
With regulators paying closer attention to performance advertising, GIPS compliance provides a defensible framework for how you present results, positioning your firm on the right side of evolving expectations.
How TSG Can Help
TSG Performance (formerly The Spaulding Group) has spent more than 30 years helping investment firms navigate GIPS compliance and verification. We are a boutique firm by design, which means every engagement is led by senior-level GIPS specialists with deep, practical expertise. No junior staff. No rotating teams. No long-term contracts.
We work with firms of all sizes, from emerging RIAs to global asset managers. Our approach is thorough, efficient, and built on decades of hands-on experience.
What sets us apart:
- Senior-level expertise on every engagement. Your verifier knows the standards inside and out.
- Efficient, onsite verifications. We minimize disruption and avoid endless back-and-forth data requests.
- Practical guidance. We help you understand the standards, not just comply with them.
- Exclusive client resources. Access to our Insiders’ website with tools, templates, checklists, and educational content.
- Publisher of The Journal of Performance Measurement. We do not just verify. We advance the industry.
Whether you are exploring GIPS for the first time or looking for a verification firm that takes the process as seriously as you do, TSG is here to help. [INTERNAL LINK: link to About TSG Performance]
Get Started with GIPS Compliance
Ready to take the next step? TSG Performance offers no-obligation conversations and customized proposals tailored to your firm’s size, strategy, and current state of readiness.
Request a proposal: tsgperformance.com/request-a-proposal/
Call us: 732-873-5700
Email: CSpaulding@TSGperformance.com
GIPS compliance is how the best firms in the world demonstrate that their performance speaks for itself. Let us help you join them.
GIPS is a registered trademark owned by CFA Institute. CFA Institute does not endorse or promote this organization, nor does it warrant the accuracy or quality of the content contained herein.