To take the hype out of past performance statistics of many investment managers, the Association of Investment Management and Research has developed standards for historical performance reporting. A second aspect of this performance reporting is a suggested independent review by CPAs. The attestation standards provide the vehicle. Millions of personal, pension, and endowment dollars are placed weekly with professional investment managers based on advertised historical performance records that have never been subjected to independent scrutiny. Investment advisors have been granted a trust from prospective clients and their consultants virtually unheard of in matters involving such sizeable assets.
Investment managers live and die based on past performance.
While the relative importance of a manager's record varies among prospective clients, it's usually first or second on the list of manager selection criteria. Despite client and consultant fixation on past performance, investment managers are allowed to present their historical track record on the honor system with a total absence of independent verification. There are rampant abuses in advertised performance records among investment managers. Volumes could be written on the bending and breaking of rules that accompany investment managers' track records. Here, the investment performance record is manipulated by the manager's inclusion of only selected accounts in the data.