You are reading the 2026 curriculum (exams up to November 2026). Sitting in February 2027 or later? Go to the 2027 Ethical and Professional Standards guide.
Why the GIPS standards exist, who can claim compliance and who benefits
Before the Global Investment Performance Standards (GIPS), managers could show their best account, drop failed portfolios or pick flattering periods, so track records could not be compared. GIPS sets one global way to calculate and present performance. Only organizations that manage actual assets can claim compliance, firm-wide, and clients, firms and asset owners all benefit.
Before this: Guidance for Standards I–VII
On the exam
- Explain why the GIPS standards were created, who can claim compliance, and who benefits from compliance
Explain why GIPS was created, who can claim compliance and who benefits. Expect 'which of these can claim compliance?' and 'which practice was GIPS designed to prevent?'. The usual wrong answers let software or a consultant comply, allow partial claims, or call GIPS mandatory.
How deeply to learn each part
- Know the idea
- Understand it in general. It frames other topics, but you will not calculate with it.
- Use it
- Understand it well enough to solve a question with it. Recognize when it applies.
- Memorize
- Learn it by heart. The exam will not give it to you.
You know this one. The full lesson is folded away. The takeaways, formulas and checkpoint below are your quick refresher, and the checkpoint is a fair test of whether you still do.
You tested strong here. The full lesson is folded away. The takeaways, formulas and checkpoint below are your quick refresher, and the checkpoint is a fair test of whether you still know it.
Why do the GIPS standards exist?
The GIPS standards (Global Investment Performance Standards) are voluntary, practitioner-driven ethical standards for calculating and presenting investment performance. Their aim is fair representation and full disclosure : do not misrepresent results, and share everything a prospective client needs to judge them.
Memorize
Before they existed, a pension fund choosing a manager might receive proposals from several firms in different countries, each using its own method. Even honest firms were hard to compare, and some practices flattered the record. Three are the exam favorites.
| Practice | What it looks like |
|---|---|
| Representative accounts | Showing the single best-performing portfolio as “our strategy’s return” |
| Survivorship bias | An average that leaves out portfolios closed after poor results |
| Varying time periods | Quoting only the window in which the strategy beat its benchmark |
- Representative accounts Memorize one top portfolio stands for the strategy
- Survivorship bias Memorize portfolios closed after poor results left out
- Varying time periods Memorize only the flattering window shown
The objectives follow from those problems: promote investor interests and confidence, ensure accurate and consistent data, win worldwide acceptance of a single standard, promote fair global competition among firms, and support industry self-regulation.
Exam tip Match the symptom to the practice: one account shown is representative accounts, accounts missing is survivorship bias, a chosen window is varying time periods.
Who can claim compliance?
Any firm that manages actual assets may choose to comply. Asset owners (such as pension funds and sovereign funds) can comply in the same way if they compete for business. An asset owner that does not compete but reports its performance to an oversight body may choose the GIPS Standards for Asset Owners.
Memorize
Two groups cannot claim, because they do not manage the assets in question. A consultant may endorse GIPS or require its managers to comply, but cannot claim compliance. Software and its vendors cannot be “compliant”; they can only help a firm calculate performance the way GIPS requires.
- Can claim Memorize with the GIPS Compliance Statement
- Investment management firms GIPS Standards for Firms
- Asset owners that compete for business same as a firm
- Asset owners that only report to an oversight body may use the Standards for Asset Owners
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- Cannot claim Memorize may support GIPS, never be compliant
- Consultants that do not manage the assets may endorse GIPS or require it of managers
- Software and software vendors can help a firm comply
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How does a firm make the claim?
Compliance is firm-wide compliance . It cannot be achieved for a single product or composite, and a firm has only two options:
- Meet all applicable requirements and claim compliance using the GIPS Compliance Statement .
- Do not meet them all, and make no claim and no reference to GIPS.
So a statement such as “complies except for…” is not allowed, and neither is a claim for one strategy only. Compliance is also voluntary compliance : it is not typically required by law or regulators.
Who benefits from compliance?
| Group | Benefit |
|---|---|
| Firms | Credibility with prospects that the record is complete and fairly presented; entry to competitive bids that call for GIPS compliance; stronger internal controls over performance |
| Prospective clients and investors | More confidence in the integrity of presentations and easier comparison between firms |
| Asset owners and oversight bodies | Consistent reporting of risk and return across managers, which helps explain the sources of risk and excess return |
GIPS does not remove the need for in-depth due diligence by a client. It raises the credibility of firms that take on the responsibility.
Go deeper The three chapters of the 2020 standards
The 2020 edition has three chapters: the GIPS Standards for Firms, the GIPS Standards for Asset Owners and the GIPS Standards for Verifiers. Organizations that compete for business must use the Standards for Firms, which is the chapter this module introduces. The Level I curriculum treats the other two only as names to recognize.
Go deeper Practitioner-driven, and how that relates to regulation
GIPS were written by the investment industry itself rather than imposed by a regulator, which is why they are called practitioner-driven and why adoption is voluntary. The long-term mission is universal demand for compliance from asset owners, adoption by asset managers and support from regulators. Where a regulator or a client requires GIPS, it becomes a condition of that relationship, not a general legal rule.
Memorize this
MemorizeGIPS: purpose and who can claim
| Topic | What to know cold |
|---|---|
| What it is | Voluntary, practitioner-driven ethical standards: fair representation and full disclosure of performance |
| Three practices it stops | Representative accounts, survivorship bias, varying time periods |
| Can claim | Firms that manage actual assets; asset owners too (as a firm if they compete for business, otherwise under the Standards for Asset Owners) |
| Cannot claim | Consultants that do not manage the assets, software and its vendors, individuals |
| Claim rule | Firm-wide, all or nothing, only through the GIPS Compliance Statement. No partial claims |
| Legal status | Voluntary. Not typically required by law or regulators |
| Who benefits | Firms, prospective clients and investors, asset owners and their oversight bodies |
Memory hook Best account, lost accounts, lucky window: the three ways to flatter a record. One shared rulebook, claimed whole or not at all.
Know it cold Manage money, claim for the whole firm, use the statement; otherwise say nothing about GIPS.
- Representative accounts Memorize one top portfolio stands for the strategy
- Survivorship bias Memorize portfolios closed after poor results left out
- Varying time periods Memorize only the flattering window shown
- Can claim Memorize with the GIPS Compliance Statement
- Investment management firms GIPS Standards for Firms
- Asset owners that compete for business same as a firm
- Asset owners that only report to an oversight body may use the Standards for Asset Owners
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- Cannot claim Memorize may support GIPS, never be compliant
- Consultants that do not manage the assets may endorse GIPS or require it of managers
- Software and software vendors can help a firm comply
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How it is asked
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Which can claim compliance?
A software vendor, a manager of client assets, a consultant that manages no assets. Which can claim?
The manager of client assets. Trap: "software that calculates returns as GIPS requires".
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Name the misleading practice
Average return of a strategy leaves out accounts closed after poor results.
Survivorship bias. Best single account is representative accounts; best window is varying time periods.
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Partial compliance statement
Firm claims compliance "except for" one calculation rule.
Not permitted. All or nothing. Trap: "acceptable if disclosed".
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Is it mandatory?
Must a firm comply with GIPS to operate?
No, voluntary. Not typically required by regulators.
Exam traps
- Saying software or a consultant can be 'GIPS compliant'. Only a firm (or asset owner) that manages assets can.
- Thinking a firm can comply for one strategy or product only. Compliance is firm-wide.
- Allowing a statement such as 'complies except for...'. It is all requirements or no claim.
- Thinking GIPS is legally required. It is voluntary.
- Thinking GIPS compliance replaces a client's own due diligence. It raises credibility; it does not remove the need to check.
Checkpoint
3 exam-style questions. About 90 seconds each.
1Which of the following can claim compliance with the GIPS standards?
2A firm's marketing reports the average return of its value strategy using only accounts that are still open today. Several accounts closed after poor results and are left out. This practice is best described as:
3A firm meets every GIPS requirement except one calculation rule, and states that it 'complies with the GIPS standards except for the calculation of returns for pooled funds'. This statement is:
Key takeaways
- GIPS stops best-account, survivorship and cherry-picked-period presentations by setting one way to calculate and present performance.
- Only organizations that manage actual assets can claim compliance: firms, and asset owners (as firms if they compete for business).
- Compliance is voluntary, firm-wide and all or nothing, shown with the GIPS Compliance Statement.
- Firms, prospective clients and asset owners all benefit, but clients still need due diligence.
Questions about this lesson?
Where this comes back
- GIPS key concepts and composites Introduction to the Global Investment Performance Standards (GIPS)
Questions candidates ask
Why were the GIPS standards created?
Managers once showed their best account, left out portfolios that failed or quoted only flattering periods, so clients could not compare track records. GIPS sets one worldwide way to calculate and present performance, with fair representation and full disclosure.
Who can claim compliance with GIPS?
Any firm that manages actual assets. Asset owners can too: in the same way as firms if they compete for business, or under the GIPS Standards for Asset Owners if they report only to an oversight body. Consultants that manage no assets, software and software vendors cannot claim compliance, though they can endorse GIPS or help firms comply.
Is GIPS compliance mandatory?
No. It is voluntary and not typically required by law or regulators. A firm that chooses to claim it must meet every applicable requirement across the whole firm and use the GIPS Compliance Statement.
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