SD-09.6 — GIPS & Performance Standards Compliance

Business Domain: BD-09 Performance & Analytics (Middle office) · Applies: BOTH

Purpose

Ensures performance is calculated and presented to recognised standards — principally the Global Investment Performance Standards (GIPS). Performance numbers carry weight only if they are produced and shown to a discipline an outside party can trust. SD-09.6 is that discipline: it governs the calculation methodology, maintains the composites that GIPS is built on, verifies performance claims, and is the point of contact for external verification.

Service Operations

• GIPS composite definition and maintenance — define composites (groups of portfolios run to one strategy), set inclusion and exclusion criteria, and maintain composite membership over time.
• Calculation-methodology governance — own the firm’s performance-calculation methodology and approve any change to it: the return-calculation rules SD-09.1 calculates to, the attribution-methodology choice (returns-based, holdings-based or transactions-based) SD-09.2 follows, and the appraisal measures SD-09.3 produces.
• Performance-claim verification — check that every performance figure presented externally is accurate, complete and compliant before it is used.
• GIPS-compliant presentation production — produce the GIPS report the situation requires: composite reports, pooled-fund reports (broadly-distributed and limited-distribution) and, for asset owners, asset-owner reports — each with the disclosures GIPS mandates.
• Error-correction policy — maintain the documented material-error correction policy GIPS requires, and apply it when a presented figure is found to be wrong.
• External verification liaison — manage the relationship with the independent GIPS verifier.
• Standards-change monitoring — track changes to GIPS and other performance standards and propagate them into the methodology.

Inputs and outputs

• Inputs: the return, attribution and appraisal figures from SD-09.1 / SD-09.2 / SD-09.3; portfolio and composite definitions; the firm’s performance methodology.
• Outputs: GIPS-compliant composite, pooled-fund and asset-owner presentations; a verified, governed methodology that SD-09.1 / SD-09.2 / SD-09.3 calculate against; verification status — consumed by SD-16.2 Owner & Investor Reporting, SD-16.3 Regulatory Reporting & Filings, and SD-14.8 Internal Audit.

Entities

• Consumes: E-03 Portfolio / Mandate (composite membership), and the performance figures produced across BD-09; the SD-09.1 return, attribution and appraisal figures; the SD-09.2 return, attribution and appraisal figures; the SD-09.3 return, attribution and appraisal figures.
• Owns: the composite as a concept and the methodology governance. A composite is treated as a grouping of portfolios; whether the composite warrants its own entity (a defined, membership-versioned grouping over E-03) is an open question — see below.

Standards

• GIPS (Global Investment Performance Standards, CFA Institute) — the core standard this Service Domain exists to uphold: input-data consistency, calculation methodology, composite construction, disclosure, and the tailored provisions for asset owners (sovereign funds, pensions, endowments). The 2020 edition is the current one, and its structural move was to generalise — to remove asset-class-specific provisions and key its elections off a mode-and-liquidity test rather than an asset-class label. The money-weighted-return election turns on whether the firm controls the external cash flows into and out of the portfolio — a mode test, satisfied by a closed-end private-markets fund but also by any liquidity-constrained strategy with controlled flows, not a “private-markets” asset-class gate. The 2020 edition likewise decoupled pooled-fund reporting from the composite requirement. The methodology this Service Domain governs reads the test as a mode-and-liquidity condition, not an asset-class one, exactly as the standard does.
• The GIPS concepts — composite, the firm, investment discretion — are canonical-model vocabulary used across BD-09.

Open extensions

• Whether Composite should be an entity — a membership-versioned grouping over Portfolio / Mandate (E-03), parallel to how Fund Family groups funds.
• The relationship to a stored Performance Result entity (the open question in SD-09.1) — GIPS verification is a strong argument for performance figures carrying provenance.