Part 1: Creating GIPS Policies and Procedures

Sean P. Gilligan, CFA, CPA, CIPM
Managing Partner
June 6, 2017
15 min
Part 1: Creating GIPS Policies and Procedures

Firm Definition and Definition of Discretion

GIPS compliant firms are required to document how they comply with the GIPS requirements as well as any recommendations that the firm chooses to follow. This document acts as the firm’s internal representation of their GIPS compliance, and is intended to state the firm’s policies and describe the procedures the firm follows to maintain its compliance.

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Many firms create their GIPS policies and procedures (“GIPS P&P”) from a template; however, unless this template is customized to address the unique circumstances of the firm, it will not sufficiently describe the firm’s actual practices in place to adhere to the GIPS requirements. Given that every firm has their own unique set of circumstances, we cannot cover every detail that your GIPS P&P should include, but we will cover the most important parts that every firm is required to document. Within Part 1 of this two part series we will focus on Firm Definition and Definition of Discretion. In Part 2 we will cover calculation methodology, books and records, composite definition, and error correction.

Firm Definition

The GIPS standards must be applied to your firm as a whole, not to a single product or strategy you manage. How your firm is defined for GIPS purposes is primarily based on how the firm is held out to the public, which may differ from the legal structure of your firm.

Most small and mid-sized investment managers define their firm for GIPS purposes the same as they are defined for legal and regulatory purposes. If you choose to define your firm more narrowly than the legal entity, it is important to ensure that you will be able to clearly and consistently hold yourself out to the public based on this more narrow definition. Most importantly, you must never imply that any part of your firm that falls outside of your GIPS Firm Definition is GIPS compliant.

Your GIPS P&P must include a written definition of your firm. This definition will then be provided as a disclosure in each of your firm’s GIPS compliant presentations. The following are a couple examples of how one might define their firm:

Example 1 – Firm Definition Matches Firm’s Regulatory Registration

ABC Asset Management, LLC is a registered investment advisor with the United States Securities and Exchange Commission in accordance with the Investment Advisors Act of 1940. ABC Asset Management, LLC manages equity and fixed income strategies for institutions and high net worth individuals.

Example 2 – Firm Defined More Narrowly than the Firm’s Regulatory Registration

ABC – Institutional is the Institutional Division of ABC Asset Management, LLC, which manages equity and fixed income strategies for institutional investors. ABC Asset Management, LLC is a registered investment adviser with the United States Securities and Exchange Commission in accordance with the Investment Advisers Act of 1940. ABC Asset Management, LLC also includes a wealth management division focused on managing customized portfolios for high net worth individuals. The institutional and wealth management divisions are held out to the public as separate entities and only the institutional division complies with the GIPS standards.

Definition of Discretion

One of the benefits of GIPS is that it helps your firm demonstrate its ability to manage each strategy that it offers. To ensure that your composite results truly reflect your portfolio manager’s decision-making process, it is important to include only the accounts that are free of material, client-mandated restrictions in your composites.

GIPS requires all discretionary, fee-paying portfolios to be included in at least one composite, while non-discretionary portfolios are excluded from composites. Within your GIPS P&P you can define how to determine the discretionary status of each account.

The term “discretion” is defined differently for GIPS than it typically is for legal or regulatory purposes. For example, you may have a discretionary contract for an account that you deem to be non-discretionary for GIPS purposes because of restrictions the client places on the implementation of the strategy. The definition of discretion section of your firm’s GIPS P&P should outline objective criteria for determining the discretionary status of accounts.

This section typically includes the types of restrictions that would cause an account to be deemed non-discretionary for GIPS purposes. Ideally, firms should include thresholds to ensure the policy can be followed consistently. For example:

  • Custom allocation requests that cause the portfolio’s asset allocation to deviate by more than 10% from the strategy’s target allocation.
  • Restricting the purchase or sale of certain securities that affects more than 10% of the portfolio.
  • Requests to hold cash at a level more than 5% above the current cash target.
  • Monthly, recurring cash flows regardless of size.
  • The use of margin, regardless of amount used.

As far as determining the thresholds to set, firms that manage their strategies very strictly to a model will typically have very low thresholds or even a 0% tolerance for deviations from their model. These deviations would trigger the portfolio to be deemed non-discretionary and excluded from the composite. Firms that allow for greater customization in their portfolio construction will typically have a higher tolerance for deviations.

When setting the criteria for determining discretion you’ll want to consider the following:

  1. A greater tolerance for deviations from the strategy’s holdings/allocation, will result in more portfolios in the composite (higher disclosed composite size), but dispersion (differences in performance between portfolios in the same composite) will also be higher.
  2. A lower tolerance for deviations results in tighter dispersion, but composite assets will be smaller and your firm’s number of non-discretionary accounts will be larger.

Your firm should find a balance that results in composite performance that meaningfully reflects the size and dispersion of your strategies.

Updates for GIPS 2020

The GIPS standards were updated in 2020. Check out our post How to Update Your GIPS P&P for GIPS 2020 to make sure your P&Ps are consistent with these changes.

Want to Learn More?

If you have any questions about the GIPS Standards, we would love to help.  Longs Peak’s professionals have extensive experience helping firms become GIPS compliant as well as helping them maintain compliance with the GIPS Standards on an ongoing basis. 

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Valuation Timing for Illiquid Investments
Explore how firms & asset owners can balance accuracy & timeliness in performance reporting for illiquid investments.
June 23, 2025
15 min

For asset owners and investment firms managing private equity, real estate, or other illiquid assets, one of the most persistent challenges in performance reporting is determining the right approach to valuation timing. Accurate performance results are essential, but delays in receiving valuations can create friction with timely reporting goals. How can firms strike the right balance?

At Longs Peak Advisory Services, we’ve worked with hundreds of investment firms and asset owners globally to help them present meaningful, transparent performance results. When it comes to illiquid investments, the trade-offs and decisions surrounding valuation timing can have a significant impact—not just on performance accuracy, but also on how trustworthy and comparable the results appear to stakeholders.

Why Valuation Timing Matters

Illiquid investments are inherently different from their liquid counterparts. While publicly traded securities can be valued in real-time with market prices, private equity and real estate investments often report with a delay—sometimes months after quarter-end.

This delay creates a reporting dilemma: Should firms wait for final valuations to ensure accurate performance, or should they push ahead with estimates or lagged valuations to meet internal or external deadlines?

It’s a familiar struggle for investment teams and performance professionals. On one hand, accuracy supports sound decision-making and stakeholder trust. On the other, reporting delays can hinder communication with boards, consultants, and beneficiaries—particularly for asset owners like endowments and public pension plans that follow strict reporting cycles.

Common Approaches to Delayed Valuations

For strategies involving private equity, real estate, or other illiquid holdings, receiving valuations weeks—or even months—after quarter-end is the norm rather than the exception. To deal with this lag, investment organizations typically adopt one of two approaches to incorporate valuations into performance reporting: backdating valuations or lagging valuations. Each has benefits and drawbacks, and the choice between them often comes down to a trade-off between accuracy and timeliness.

1. Backdating Valuations

In the backdating approach, once a valuation is received—say, a March 31 valuation that arrives in mid-June—it is recorded as of March 31, the actual valuation date. This ensures that performance reports reflect economic activity during the appropriate time period, regardless of when the data became available.

Pros:
  • Accuracy: Provides the most accurate snapshot of asset values and portfolio performance for the period being reported.
  • Integrity: Maintains alignment between valuation dates and the underlying activity in the portfolio, which is particularly important for internal analysis or for investment committees wanting to evaluate manager decisions during specific market environments.
Cons:
  • Delayed Reporting: Final performance for the quarter may be delayed by 4–6 weeks or more, depending on how long it takes to receive valuations.
  • Stakeholder Frustration: Boards, consultants, and beneficiaries may grow  frustrated if they cannot access updated reports in a timely manner, especially if performance data is tied to compensation decisions, audit     deadlines, or public disclosures.

When It's Useful:
  • When transparency and accuracy are prioritized over speed—e.g., in annual audited performance reports or regulatory filings.
  • For internal purposes where precise attribution and alignment with economic events are critical, such as evaluating decision-making during periods of market volatility.

2. Lagged Valuations

With the lagged approach, firms recognize delayed valuations in the subsequent reporting period. Using the same example: if the March 31valuation is received in June, it is instead recorded as of June 30. In this case, the performance effect of the Q1 activity is pushed into Q2’sreporting.

Pros:
  • Faster Reporting: Performance reports can be completed shortly after quarter-end, meeting board, stakeholder, and regulatory timelines.
  • Operational Efficiency: Teams aren’t held up by a few delayed valuations, allowing them to close the books and move on to other tasks.

Cons:
  • Reduced Accuracy: Performance reported for Q2 includes valuation changes that actually occurred in Q1, misaligning performance with the period in which it was earned.
  • Misinterpretation Risk: If users are unaware of the lag, they may misattribute results to the wrong quarter, leading to flawed conclusions about manager skill or market behavior.

When It's Useful:
  • When quarterly reporting deadlines must be met (e.g., trustee meetings, consultant updates).
  • In environments where consistency and speed are prioritized, and the lag can be adequately disclosed and understood by users.

Choosing the Right Approach (and Sticking with It)

Both approaches are acceptable from a compliance and reporting perspective. However, the key lies in consistency.

Once an organization adopts an approach—whether back dating or lagging—it should be applied across all periods, portfolios, and asset classes. Inconsistent application opens the door to performance manipulation(or the appearance of it), where results might look better simply because a valuation was timed differently.

This kind of inconsistency can erode trust with boards, auditors and other stakeholders. Worse, it could raise red flags in a regulatory review or third-party verification.

Disclose, Disclose, Disclose

Regardless of the method you use, full transparency in reporting is essential. If you’re lagging valuations by a quarter, clearly state that in your disclosures. If you change methodologies at any point—perhaps transitioning from lagged to backdated—explain when and why that change occurred.

Clear disclosures help users of your reports—whether board members, beneficiaries, auditors, or consultants—understand how performance was calculated. It allows them to assess the results in context and make informed decisions based on the data.

Aligning Benchmarks with Valuation Timing

One important detail that’s often overlooked: your benchmark data should follow the same valuation timing as your portfolio.

If your private equity or real estate portfolio is lagged by a quarter, but your benchmark is not, your performance comparison becomes flawed. The timing mismatch can mislead stakeholders into believing the strategy outperformed or underperformed, simply due to misaligned reporting periods.

To ensure a fair and meaningful comparison, always apply your valuation timing method consistently across both your portfolio and benchmark data.

Building Trust Through Transparency

Valuation timing is a technical, often behind-the-scenes issue—but it plays a crucial role in how your investment results are perceived. Boards and stakeholders rely on accurate, timely, and understandable performance reporting to make decisions that impact beneficiaries, employees, and communities.

By taking the time to document your valuation policy, apply it consistently, and disclose it clearly, you are reinforcing your organization’s commitment to integrity and transparency. And in a world where scrutiny of investment performance is only increasing, that commitment can be just as valuable as the numbers themselves.

Need help defining your valuation timing policy or aligning performance reporting practices with industry standards?

Longs Peak Advisory Services specializes in helping investment firms and asset owners simplify their performance processes, maintain compliance, and build trust through transparent reporting. Contact us to learn how we can support your team.

Key Takeaways from the 2025 PMAR Conference
This year’s PMAR Conference delivered timely and thought-provoking content for performance professionals across the industry. In this post, we’ve highlighted our top takeaways from the event—including a recap of the WiPM gathering.
May 29, 2025
15 min

The Performance Measurement, Attribution & Risk (PMAR) Conference is always a highlight for investment performance professionals—and this year’s event did not disappoint. With a packed agenda spanning everything from economic uncertainty and automation to evolving training needs and private market complexities, PMAR 2025 gave attendees plenty to think about.

Here are some of our key takeaways from this year’s event:

Women in Performance Measurement (WiPM)

Although not officially a part of PMAR, WiPM often schedules its annual in-person gathering during the same week to take advantage of the broader industry presence at the event. This year’s in-person gathering, united female professionals from across the country for a full day of connection, learning, and mentorship. The agenda struck a thoughtful balance between professional development and personal connection, with standout sessions on AI and machine learning, resume building, and insights from the WiPM mentoring program. A consistent favorite among attendees is the interactive format—discussions are engaging, and the support among members is truly energizing. The day concluded with a cocktail reception and dinner, reinforcing the group’s strong sense of community and its ongoing commitment to advancing women in the performance measurement profession.

If you’re not yet a member and are interested in joining the community, find WiPM here on LinkedIn.

Uncertainty, Not Risk, is Driving Market Volatility

John Longo, Ph.D., Rutgers Business School kicked off the conference with a deep dive into the global economy, and his message was clear: today’s markets are more uncertain than risky. Tariffs, political volatility, and unconventional strategies—like the idea of purchasing Greenland—are reshaping global trade and investment decisions. His suggestion? Investors may want to look beyond U.S. borders and consider assets like gold or emerging markets as a hedge.

Longo also highlighted the looming national debt problem and inflationary effects of protectionist policies. For performance professionals, the implication is clear: macro-level policy choices are creating noise that can obscure traditional risk metrics. Understanding the difference between risk and uncertainty is more important than ever.

The Future of Training: Customized, Continuous, and Collaborative

In the “Developing Staff for Success” session, Frances Barney, CFA (former head of investment performance and risk analysis for BNY Mellon) and our very own Jocelyn Gilligan, CFA, CIPM explored the evolving nature of training in our field. The key message: cookie-cutter training doesn't cut it anymore. With increasing regulatory complexity and rapidly advancing technology, firms must invest in flexible, personalized learning programs.

Whether it's improving communication skills, building tech proficiency, or embedding a culture of curiosity, the session emphasized that training must be more than a check-the-box activity. Ongoing mentorship, cross-training, and embracing neurodiversity in learning styles are all part of building high-performing, engaged teams.

AI is Here—But It Needs a Human Co-Pilot

Several sessions explored the growing role of AI and automation in performance and reporting. The consensus? AI holds immense promise, but without strong data governance and human oversight, it’s not a silver bullet. From hallucinations in generative models to the ethical challenges of data usage, AI introduces new risks even as it streamlines workflows.

Use cases presented ranged from anomaly detection and report generation to client communication enhancements and predictive exception handling. But again and again, speakers emphasized: AI should augment, not replace, human expertise.

Private Markets Require Purpose-Built Tools

Private equity, private credit, real estate, and hedge funds remain among the trickiest asset classes to measure. Whether debating IRR vs. TWR, handling data lags, or selecting appropriate benchmarks, this year's sessions highlighted just how much nuance is involved in getting private market reporting right.

One particularly compelling idea: using replicating portfolios of public assets to assess the risk and performance of illiquid investments. This approach offers more transparency and a better sense of underlying exposures, especially in the absence of timely valuations.

Shorting and Leverage Complicate Performance Attribution

Calculating performance in long/short portfolios isn’t straightforward—and using absolute values can create misleading results. A session on this topic broke down the mechanics of short selling and explained why contribution-based return attribution is essential for accurate reporting.

The key insight: portfolio-level returns can fall outside the range of individual asset returns, especially in leveraged portfolios. Understanding the directional nature of each position is crucial for both internal attribution and external communication.

The SEC is Watching—Are You Ready?

Compliance was another hot topic, especially in light of recent enforcement actions under the SEC Marketing Rule. From misuse of hypothetical performance to sloppy use of testimonials, the panelists shared hard-earned lessons and emphasized the importance of documentation. This panel was moderated by Longs Peak’s Matt Deatherage, CFA, CIPM and included Lance Dial, of K&L Gates along with Thayne Gould from Vigilant.

FAQs have helped clarify gray areas (especially around extracted performance and proximity of net vs. gross returns), but more guidance is expected—particularly on model fees and performance portability. If you're not already documenting every performance claim, now is the time to start.

“Phantom Alpha” Is Real—And Preventable

David Spaulding of TSG, closed the conference with a deep dive into benchmark construction and the potential for “phantom alpha.” Even small differences in rebalancing frequency between portfolios and their benchmarks can create misleading outperformance. His recommendation? Either sync your rebalancing schedules or clearly disclose the differences.

This session served as a great reminder that even small implementation details can significantly impact reported performance—and that transparency is essential to maintaining trust.

Final Thoughts

From automation to attribution, PMAR 2025 showcased the depth and complexity of our field. If there’s one overarching takeaway, it’s that while tools and techniques continue to evolve, the core principles—transparency, accuracy, and accountability—remain as important a sever.

Did you attend PMAR this year? We’d love to hear your biggest takeaways. Reach out to us at hello@longspeakadvisory.com or drop us a note on LinkedIn!

ColoradoBiz Names Longs Peak’s Jocelyn Gilligan, CFA, CIPM as a Gen XYZ Top Young Professional
Longs Peak is pleased to announce that Partner and Co-Founder, Jocelyn Gilligan has been named a GenXYZ Top Young Professional by ColoradoBiz Magazine. As ColoradoBiz states, “They’re uncommon achievers, whether as entrepreneurs, CEOs, nonprofit leaders, visionaries critical to their companies’ success or, in some cases, all of those roles. This year’s Top 25 Young Professionals figure to continue making a difference professionally and in their communities for years to come.”
March 14, 2023
15 min

Longs Peak is pleased to announce that Partner and Co-Founder, Jocelyn Gilligan has been named a GenXYZ Top Young Professional by ColoradoBiz Magazine.

As ColoradoBiz states, “They’re uncommon achievers, whether as entrepreneurs, CEOs, nonprofit leaders, visionaries critical to their companies’ success or, in some cases, all of those roles. This year’s Top 25 Young Professionals figure to continue making a difference professionally and in their communities for years to come.”

Jocelyn grew up in Boulder, CO and graduated from the University of Colorado. She started her career at Ernst & Young in New York City where she worked on their Financial Services Transfer Pricing Team. She transferred with EY to their office in Shanghai and then eventually to Hong Kong. Jocelyn left EY as a Manager and relocated back to Colorado where she and her husband started a family. Soon thereafter, Jocelyn and Sean founded Longs Peak out of a small one-car garage in their home in Longmont, CO. Now running a thriving team of 14, Jocelyn has weathered the ups and downs of entrepreneurship. She credits a lot of their success to their amazing team and the community of entrepreneurs they live near and network with (Longs Peak is an active member of EO (Entrepreneurs Organization)).

Jocelyn is a voting member of the PTO at her children’s school and a member of Women in Investment Performance Measurement, a group recently founded to support women in the investment performance industry.

About ColoradoBiz’s Top 25 Young Professionals

The 13th annual Gen XYZ awards is open to those under 40 who live and work in Colorado — numbered in the hundreds, making for difficult decisions and conversations among judges, as always. Applications were judged by our editorial board based on career achievement, community engagement and their stories of how they got to where they are now.

About Longs Peak

Longs Peak is a purpose and values-driven company. It is our mission to make investment performance information more transparent and reliable—empowering investors to make better, more informed investment decisions.

At the onset, we were looking to help smaller investment managers by giving them access to professional performance experts and tools typically only available to very large firms. We know that our work enables emerging managers to compete with the big guys and helps facilitate their growth. We strive to be our clients’ most valued outsource partner and to be known for our exceptional client service. We know that providing exceptional client service means that we must first create a culture that lives by the ideals we are trying to create for our clients. A place where incredibly talented individuals are empowered to put their best work into the hands of clients that truly value what we do. As a firm, we recognize that our greatest asset is people – both those we work with and those we work for. We continue to evolve into something that represents the needs of both of these groups and hope someday a GIPS Report is provided to every prospective investor in the world.