US/EUROPE – The US has redrafted its AIMR/PPS investment performance standard guidelines to bring them in line with GIPS, the Global Investment performance Standards, in a significant move forward for worldwide ethical standards in asset management.
John Stannard, chairman of the AIMR Investment Performance Committee (IPC), the global representative body for GIPS, says the redrafting is an “ important milestone” for GIPS.
Stannard comments: “In the US the perception was about a year ago that the global standards were going to be something for the non-US market, and that was not the case.
“ Because the US market is pretty comprehensively covered by AIMR/PPS they weren’t looking to change. It’s not that they were against GIPS its just that they had the procedures in place.
“ They didn’t appreciate that GIPS was so similar to PPS. The redraft is making a very strong statement to the US market that GIPS is at the core of the American standards and that you need to know about it; if you’re PPS compliant then you’re 99% certain to be GIPS compliant.
“ I think until recently a lot of American firms thought they were going to have to change quite radically to be GIPS compliant. Now they find out they don’t have to be.”
He adds that the redraft will be good news for European firms, because European buyers of services will be working in the same standards as the US.
Jessica Mann, vice president, standard setting, at AIMR, says GIPS were based on AIMR/PPS, so there was a lot of overlap but that around 20% of AIMR/PPS still needed to be aligned.
“ AIMR /PPS referred to 2 levels, level 1 for firm-wide compliance, while level 2 was a performance audit on a particular composite.
“ When GIPS came out we had the benefit of hindsight in remedying this situation and emphasising the fact that compliance was a firm wide validation issue.
“ In developing GIPS we said there would be only one type of verification. We will allow performance audits but you can give that any degree of billing and call it verification, because it is an audit.”
Mann says level one will now correspond to GIPS verification with level two being the performance audit, but that firms will only be able to refer to this until 2003 as a performance audit, level 2 standard.
“ We are signalling to the market that after 2003 you will no longer be able to refer to this.
Along with the US, South Africa, Japan, Germany and the Netherlands are also shortly expected to bring their domestic standards into line with GIPS.