# Global Investment Performance Standards (GIPS): Definition and Uses

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*— Sydney Saporito / Investopedia*

> **Definition**
>
> Global Investment Performance Standards (GIPS) are a set of voluntary rules for how investment managers can tell you how good their investments are at making you money.

## What Are Global Investment Performance Standards (GIPS)?

Global Investment Performance Standards (GIPS) provide a uniform approach to calculating and presenting investment performance. They are a crucial framework for fostering trust and transparency.

GIPS are voluntary and used by [investment managers](https://www.investopedia.com/terms/i/investment-manager.asp) throughout the world to ensure full disclosure and fair representation of their investment performance. The goal of the standards is to make it possible for investors to compare one firm’s performance against that of another firm.

Global Investment Performance Standards were created by the [CFA Institute](https://www.investopedia.com/terms/c/cfainstitute.asp), a global association for investment management professionals, and are governed by the GIPS Executive Committee.

### Key Takeaways

*   Global Investment Performance Standards (GIPS) are a set of voluntary guidelines used by investment management firms throughout the world.
*   The goal of GIPS is to encourage full disclosure and fair representation of investment performance.
*   A revised version of GIPS took effect in 2020.

> **Important**
>
> Global Investment Performance Standards (GIPS) are intended to enable investors to compare investment firms worldwide.

## How Global Investment Performance Standards (GIPS) Work

The Global Investment Performance Standards are “a set of standardized, industry-wide ethical principles that guide investment managers and asset owners on how to fairly calculate and present their investment results” to prospective clients, according to the CFA Institute. Because the standards are voluntary, investment firms can choose to comply with them or not. However, because the standards are in broad use worldwide, complying with them makes it easier for investment firms to do business in multiple countries, saving them the time of having to apply different performance calculation measures for investment presentations, depending on the locale.

The CFA Institute says the standards:

*   “Enable investors to directly compare one firm’s track record with another firm’s record.
*   “Include composite presentation, improving transparency by eliminating survivorship biases, misrepresentations, and historical data omissions.
*   “Evolve to address issues that arise in a dynamic investment industry.
*   “\[Incentivize\] firms to invest significant time and resources into internal risk-control mechanisms and setting performance benchmarks—the hallmarks of reliable long-term success. (To claim compliance, an investment firm must demonstrate adherence to comprehensive rules governing input data, calculation methodology, composite construction, disclosures, and presentation and reporting.)”

Investment management companies often make a point of indicating that they are “GIPS compliant.” That can lend additional credibility to companies, especially those that do business outside the more mature markets of North America and Europe.

## History of Global Investment Performance Standards (GIPS)

The forerunner of the Global Investment Performance Standards was the Association for Investment Management and Research–Performance Presentation Standards (AIMR–PPS). Created in 1987, this was a set of voluntary performance guidelines for investment management firms in the United States and Canada.

In response to the need for a more international set of guidelines, the Global Investment Performance Standards were first introduced in 1999. In 2005, the CFA Institute—as the Association for Investment Management and Research had been renamed—approved a revised set of guidelines to create a single global standard of investment performance and replace the previous country-specific performance standards.

The most recent edition of Global Investment Performance Standards was released on June 30, 2019, and took effect on Jan. 1, 2020.

According to the CFA Institute, the Global Investment Performance Standards are currently used in “50 markets around the world,” and “all of the top 25 asset managers globally” claim compliance with GIPS.

> **Article Sources**
>
> 1.  CFA Institute. “[CFA Institute Releases 2020 Global Investment Performance Standards (GIPS®)](https://www.cfainstitute.org/about/press-room/2019/cfa-institute-releases-2020-global-investment-performance-standards).”
>     
> 2.  Global Investment Performance Standards. “[Global Investment Performance Standards (GIPS®) for Firms, 2020](https://www.gipsstandards.org/wp-content/uploads/2021/03/2020_gips_standards_firms.pdf).”
>     
> 3.  Global Investment Performance Standards. “[Homepage](https://www.gipsstandards.org/).”