GIPS stands for ‘Global Investment Performance Standards’. Why were the GIPS standards created? In the past, investment performance presentations were misleading. Questions about the accuracy and credibility of data made comparisons among different investment firms difficult. Common misleading practices included: Representative accounts: Using only the best performing portfolios to represent the firm’s overall performance. Survivorship bias: Excluding accounts that performed poorly and were consequently terminated. Varying time periods: Selecting time periods during which the fund had exceptional performance. The GIPS standards were created to prevent misrepresentation of performance. They establish an industry-wide, standard approach for calculation and presentation of investment… Read More
