Top 5 Risk Statistics to Include in Your Factsheets
Partner
October 4, 2023
15 min
We all know that investing involves a delicate balance of seizing opportunity and managing risk. Even if you do it well, your factsheet may not adequately explain how your strategy manages that balance. Your factsheets tell the story of your performance history and play a crucial role in your sales process by helping prospective investors make informed investment decisions. But how do you know if you’ve included the right information?
Types of Measurements
While every strategy differs in terms of its investment objective, it’s important to identify which types of statistics will be the best at helping you tell the story behind your investment strategy.
Before you choose the exact statistics to include, take a moment to think through what makes your strategy unique and then consider the audience you’re speaking to (sometimes this may mean making more than one factsheet for the same strategy – think retail vs. institutional).
Here are the main categories that should be included…
- A measure of volatility – to demonstrate stability (or variability) of your strategy
- Correlation – to express sensitivity to the benchmark or market
- Risk-adjusted returns – to standardize performance evaluation when considering risk
- Downside risk – to explain how your strategy performs in down markets
- Market Capture – to display how the strategy performs during market movements (up or down)
Only you know what makes your strategy unique and appealing to prospective investors, so take the time to determine the key pillars of your strategy and then select statistics that help demonstrate or reinforce that story.
Once that’s clear, it’s time to crunch some numbers.
Top 5 Risk Statistics
Here’s a list of the top 5 risk statistics our experts see included on our clients’ factsheets.
1. A Measure of Volatility: Standard Deviation
Investment managers have different ways of measuring volatility – often dependent on the strategy employed. Most commonly, we see standard deviation used, which is a measure of total risk (i.e., both systematic and unsystematic risk). Standard deviation quantifies the variability of a strategy’s returns from its average over a specific period. A higher standard deviation indicates greater volatility, implying that the strategy’s returns have experienced significant fluctuations or high variability.
Standard deviation is generally presented for both the strategy and a comparable benchmark. Risk-averse investors are generally looking to invest in strategies that achieve higher returns than the comparable benchmark while having a lower standard deviation than the benchmark over the same period.
Be sure to use this measure to demonstrate the stability of your strategy when it is historically low or to attract those with higher tolerance for fluctuation when it has been historically high. An explanation about how that higher fluctuation translates into outperformance will help paint a more complete picture.
2. Strategy Correlation: Beta
When assessing a new strategy, investors often want to consider how the strategy will fit into their broader portfolio. One way to evaluate this is by considering how sensitive the strategy is to the market (or the total portfolio’s benchmark) using beta. When armed with this information, investors can determine if adding your strategy would increase or decrease their exposure to the pulse of the market. If your strategy intends to offer diversification benefits, beta should be less than one (or negative). If you are adding market exposure, it should be greater than one.
In factsheets, we commonly include beta, calculated against the strategy’s benchmark, to show how the strategy moves relative to its benchmark. This is useful for investors to see if the calculated beta aligns with how an investment manager has described its investment process.
For example, for a strategy described as a “bottom-up approach that holds a concentrated portfolio of the best-performing stocks from a larger universe” (and therefore not directly tied to an index), we would expect beta to be very low (or even negative) or very high, but not close to 1. If it is close to 1, they may be a “closet indexer” that claims to have an in-depth research process, uncorrelated with the market, but in reality, is still basically replicating the benchmark. Investors would want to know this because they can invest in ETFs or funds designed to replicate a benchmark for much lower fees.
Conversely, for a strategy that is described as "enhanced indexing," beta should be close to 1 with returns that outperform the index. In this case, the goal is to track the risk level of the index while beating it performance-wise.
In either case, investors want to see strategy metrics support how your strategy and process is described. If any of these risk measures don’t align, we recommend taking the time to understand and explain why.
3. Risk-Adjusted Returns: Sharpe Ratio
While arguably the most common risk statistic to include, the Sharpe ratio is helpful as a comparison tool because it standardizes performance and risk into one measure.
The Sharpe ratio demonstrates a strategy’s risk-adjusted return by considering its excess return (return above the risk-free rate) per unit of risk taken (standard deviation). A higher Sharpe ratio is preferred. If your strategy claims to offer superior returns with lower risk, the Sharpe ratio is an appropriate measure to demonstrate that.
However, keep in mind that this measure may not be useful for strategies that are not normally distributed (e.g., hedge funds or other strategies with returns that are materially positively skewed when the strategy is successful). For most traditional investment managers, especially those targeting institutional investors, this measure is often expected on a factsheet, so don’t overlook it.
4. Assessing Downside Risk: Maximum Drawdown
Maximum drawdown measures the largest peak-to-trough decline in a strategy’s performance over a specific period. This metric is crucial because it quantifies the potential loss an investor could have experienced during the strategy’s worst-performing period. A larger maximum drawdown implies higher downside risk.
This measure is often good to show along with the max drawdown of the market or benchmark for comparison. While higher potential returns often correlate with greater downside risk, investors, equipped with this information, can determine their tolerance for this kind of loss. In addition, they can use it to compare to other similar strategies they are considering.
If your strategy claims to manage downside risk, maximum drawdown is arguably the best measure to demonstrate tactful management during down markets.
5. Market Capture: Upside/Downside Capture
These measures assess how well a strategy or portfolio performs during market movements, specifically in comparison to a benchmark. Upside capture measures the degree to which a strategy captures the positive returns of a benchmark during periods of market growth. Downside capture measures the degree to which a strategy is exposed to losses when the benchmark declines.
These capture ratios can be used to explain how a strategy aims to achieve specific goals related to market conditions. For example, “beats the market on the upside and protects on the downside” (you’d hope to see over 100% upside capture with less than 100% downside capture) or “capital preservation with risk targets below the overall market” (you’d expect to see lower than 100% upside capture with hopefully a very low downside capture).
Please note that it is most common to show these measures together (or to show total capture ratio that combines the two). Considering the “fair and balanced” requirements in the SEC marketing rule, it’s likely prudent to include both to explain the full picture.
For an aggressive strategy that is over 100% capture both on the upside and the downside or a capital preservation strategy that is under 100% both on the upside and downside, you ideally can still show that the total capture ratio is greater than 1. This demonstrates that the strategy is winning on the upside by a greater amount than it is losing on the downside or that protection on the downside more than offsets the lagging performance on the upside.
Conclusion
When it comes to investing, knowledge is power. Factsheets provide investors with valuable information to help them make informed decisions about your firm and strategies. When you provide them with a full picture of your performance that includes risk, they are more fully equipped to consider you for further due diligence.
Investment firms that understand these statistics and use them to help explain the story of their investment performance provide context and transparency in a saturated landscape of investment options.
Make sure to take the time to understand what these measures say about your performance each period and include that in some form of market commentary when you share your factsheets with prospects. This demonstrates how informed you are about the strategies you manage, how decisions made impact results, and what your plans are to address them.
Want to discuss how you can improve your factsheets with risk statistics? Schedule a free 30-minute brainstorm with one of our partners on which statistics you should include to help explain your investment performance.
Popular Post
How Mission-Based Endowments & Foundations Should Think About Investment Performance Reporting
April 27, 2026
15 min
Mission-driven institutions are entrusted with something larger than capital. They are entrusted with purpose.
Endowments, foundations, and long-term investment pools exist to support education, healthcare, research, environmental initiatives, religious or cultural programs, community development, and countless other causes—often for generations.
That long-term horizon changes how investment performance should be reported. Because when an institution thinks in decades instead of quarters, investment performance is not just about what happened recently, itis about whether the portfolio is structured to sustain spending, preserve purchasing power, and remain aligned with its mission through full market cycles.
Many institutions rely entirely on their investment managers to calculate and present investment performance. That’s common, but it’s not always sufficient.
Performance Oversight Is Not the Same as Performance Results
Investment managers are responsible for generating returns. Boards and oversight committees are responsible for evaluating those results.
Those responsibilities are distinct.
Oversight is a fiduciary duty. It is not passive, and it cannot rely solely on the information created by the party being evaluated. Effective oversight requires independence, consistency, and clarity.
When the same party both manages assets and determines how performance is calculated and presented, the lines between management and oversight can blur—even when intentions are sound and calculations are technically accurate.
In some situations, reporting may not be:
- Consistent across managers
- Based on uniform calculation methodologies
- Presented in a format designed for governance review
- Structured to facilitate long-term policy evaluation
Consider a board reviewing results from three different managers. Each reports strong performance, but one calculates returns net-of-fees, another presents gross results, and a third uses slightly different valuation timing.
At first glance, the numbers appear comparable. In reality, they may not be measuring the same thing.
Some larger institutions maintain internal performance teams or engage independent performance professionals to standardize reporting, organize data across managers, and present results in accordance with established best practices—often aligning reporting with their Investment Policy Statement and/or recognized frameworks such as the Global Investment Performance Standards (GIPS® standards).
But many of these organizations operate lean. They may not have dedicated performance measurement expertise or the infrastructure required to consolidate, normalize, and present results in a governance-ready format.
In those cases, boards are often reviewing manager-produced materials that were designed primarily for client communication—not institutional oversight. Performance reporting for these institutions should be designed to serve the governing body—not simply to showcase results.
Why This Matters for Mission-Based Institutions
Boards of endowments and foundations are often composed of dedicated volunteers, philanthropists, community leaders, and subject-matter experts. They bring vision, experience, and commitment to the institution’s mission—but not always a deep understanding of investment management and reporting.
That makes investment performance clarity essential. When reporting is unclear, oversight weakens—not because trustees lack commitment, but because the information is not presented in a way that supports meaningful evaluation.
When reporting is structured and tied directly to policy benchmarks, risk parameters, and spending objectives, trustees know what questions to ask. Conversations remain focused on long-term sustainability and mission impact.
A Practical Framework for Strong Performance Reporting
Boards of mission-driven institutions are often operating at the governance-level and should evaluate their reporting structure against four questions:
1. Is performance calculated independently?
Independent calculation or oversight reduces potential conflicts and strengthens fiduciary governance. In institutional investing, separating portfolio management from performance oversight is widely viewed as a best practice.
2. Is the methodology consistent across managers?
Multi-manager portfolios require uniform return calculation, fee treatment, and valuation policies to ensure comparability. Without consistency, “relative performance” becomes difficult to interpret.
One practical way institutions address this challenge is by complying with and requiring their managers to comply with the GIPS® standards.
The GIPS standards are a globally recognized framework administered by CFA Institute designed to promote fair representation and full disclosure in the calculation and presentation of investment performance.
Endowments and foundations that adopt the GIPS standards for their own performance calculations—and require the same of the managers they hire—send a powerful message to their boards and stakeholders that the institution is committed to transparency in how results are calculated and presented.
3. Is reporting aligned with policy benchmarks?
Boards should see performance relative to long-term policy objectives, not just absolute returns. And this information should be shown at the level at which it is managed. Simply reporting that “the portfolio returned 8%” does not answer the real governance question.
A portfolio can have a positive year and still fail to meet its strategic role within the overall allocation.
For example:
- Did the equity allocation meet its return objective relative to its benchmark?
- Did the diversifying strategies provide the downside protection they were intended to deliver?
- Did fixed income serve its role as a stabilizer?
- Did alternative investments justify their complexity and liquidity constraints?
Even if the overall portfolio met its expected return, boards should understand how it got there. Reviewing performance by allocation allows boards to evaluate whether each segment is fulfilling its mandate, not just whether the total return looks acceptable.
When reported this way, it becomes easier to see where the portfolio is meeting expectations and where it may be falling short.
4. Is communication designed for governance?
Once performance is aligned to policy benchmarks, reporting should help trustees interpret what the results mean without requiring them to operate at the manager or security-selection level.
Reports should help answer key questions:
· Are we meeting long-term objectives?
· How are managers performing relative to their mandates?
· Is risk aligned with the investment policy?
· Are we preserving capital appropriately given our spending needs?
· Did managers follow investment guidelines that align with our institution’s mission?
If any of these areas underperform, governance-level reporting should prompt clear, high-level discussion: Why did this occur? Was the result consistent with expectations? What steps, if any, are being considered to address issues going forward? If shortfalls persist, boards may need to evaluate whether the strategy or manager remains appropriate.
This kind of oversight strengthens outcomes by reinforcing accountability. Performance reporting should be communicated in plain language and simplify complex data into clear actionable insight. When this occurs, it enables boards to move from procedural review toward informed, effective governance.
From Calculation to Communication
Accurate returns are the starting point. Clear communicationis the outcome.
When performance calculation, oversight, and presentation are thoughtfully structured, board discussions become more strategic and less reactive. Boards gain confidence in their oversight, managers operate within clearer expectations, and the institution stays focused on its purpose.
A Closing Thought
Mission-driven institutions think in decades, not quarters. Their performance reporting should reflect that same discipline. Investment oversight is not just about generating returns, it is about ensuring those returns are measured, understood, and aligned with the institution’s long-term purpose.
Clear reporting strengthens governance.
Strong governance protects sustainability.
And sustainability protects the mission.
Top 5 Risk Statistics to Include in Your Factsheets
October 4, 2023
15 min
We all know that investing involves a delicate balance of seizing opportunity and managing risk. Even if you do it well, your factsheet may not adequately explain how your strategy manages that balance. Your factsheets tell the story of your performance history and play a crucial role in your sales process by helping prospective investors make informed investment decisions. But how do you know if you’ve included the right information?
Types of Measurements
While every strategy differs in terms of its investment objective, it’s important to identify which types of statistics will be the best at helping you tell the story behind your investment strategy.
Before you choose the exact statistics to include, take a moment to think through what makes your strategy unique and then consider the audience you’re speaking to (sometimes this may mean making more than one factsheet for the same strategy – think retail vs. institutional).
Here are the main categories that should be included…
- A measure of volatility – to demonstrate stability (or variability) of your strategy
- Correlation – to express sensitivity to the benchmark or market
- Risk-adjusted returns – to standardize performance evaluation when considering risk
- Downside risk – to explain how your strategy performs in down markets
- Market Capture – to display how the strategy performs during market movements (up or down)
Only you know what makes your strategy unique and appealing to prospective investors, so take the time to determine the key pillars of your strategy and then select statistics that help demonstrate or reinforce that story.
Once that’s clear, it’s time to crunch some numbers.
Top 5 Risk Statistics
Here’s a list of the top 5 risk statistics our experts see included on our clients’ factsheets.
1. A Measure of Volatility: Standard Deviation
Investment managers have different ways of measuring volatility – often dependent on the strategy employed. Most commonly, we see standard deviation used, which is a measure of total risk (i.e., both systematic and unsystematic risk). Standard deviation quantifies the variability of a strategy’s returns from its average over a specific period. A higher standard deviation indicates greater volatility, implying that the strategy’s returns have experienced significant fluctuations or high variability.
Standard deviation is generally presented for both the strategy and a comparable benchmark. Risk-averse investors are generally looking to invest in strategies that achieve higher returns than the comparable benchmark while having a lower standard deviation than the benchmark over the same period.
Be sure to use this measure to demonstrate the stability of your strategy when it is historically low or to attract those with higher tolerance for fluctuation when it has been historically high. An explanation about how that higher fluctuation translates into outperformance will help paint a more complete picture.
2. Strategy Correlation: Beta
When assessing a new strategy, investors often want to consider how the strategy will fit into their broader portfolio. One way to evaluate this is by considering how sensitive the strategy is to the market (or the total portfolio’s benchmark) using beta. When armed with this information, investors can determine if adding your strategy would increase or decrease their exposure to the pulse of the market. If your strategy intends to offer diversification benefits, beta should be less than one (or negative). If you are adding market exposure, it should be greater than one.
In factsheets, we commonly include beta, calculated against the strategy’s benchmark, to show how the strategy moves relative to its benchmark. This is useful for investors to see if the calculated beta aligns with how an investment manager has described its investment process.
For example, for a strategy described as a “bottom-up approach that holds a concentrated portfolio of the best-performing stocks from a larger universe” (and therefore not directly tied to an index), we would expect beta to be very low (or even negative) or very high, but not close to 1. If it is close to 1, they may be a “closet indexer” that claims to have an in-depth research process, uncorrelated with the market, but in reality, is still basically replicating the benchmark. Investors would want to know this because they can invest in ETFs or funds designed to replicate a benchmark for much lower fees.
Conversely, for a strategy that is described as "enhanced indexing," beta should be close to 1 with returns that outperform the index. In this case, the goal is to track the risk level of the index while beating it performance-wise.
In either case, investors want to see strategy metrics support how your strategy and process is described. If any of these risk measures don’t align, we recommend taking the time to understand and explain why.
3. Risk-Adjusted Returns: Sharpe Ratio
While arguably the most common risk statistic to include, the Sharpe ratio is helpful as a comparison tool because it standardizes performance and risk into one measure.
The Sharpe ratio demonstrates a strategy’s risk-adjusted return by considering its excess return (return above the risk-free rate) per unit of risk taken (standard deviation). A higher Sharpe ratio is preferred. If your strategy claims to offer superior returns with lower risk, the Sharpe ratio is an appropriate measure to demonstrate that.
However, keep in mind that this measure may not be useful for strategies that are not normally distributed (e.g., hedge funds or other strategies with returns that are materially positively skewed when the strategy is successful). For most traditional investment managers, especially those targeting institutional investors, this measure is often expected on a factsheet, so don’t overlook it.
4. Assessing Downside Risk: Maximum Drawdown
Maximum drawdown measures the largest peak-to-trough decline in a strategy’s performance over a specific period. This metric is crucial because it quantifies the potential loss an investor could have experienced during the strategy’s worst-performing period. A larger maximum drawdown implies higher downside risk.
This measure is often good to show along with the max drawdown of the market or benchmark for comparison. While higher potential returns often correlate with greater downside risk, investors, equipped with this information, can determine their tolerance for this kind of loss. In addition, they can use it to compare to other similar strategies they are considering.
If your strategy claims to manage downside risk, maximum drawdown is arguably the best measure to demonstrate tactful management during down markets.
5. Market Capture: Upside/Downside Capture
These measures assess how well a strategy or portfolio performs during market movements, specifically in comparison to a benchmark. Upside capture measures the degree to which a strategy captures the positive returns of a benchmark during periods of market growth. Downside capture measures the degree to which a strategy is exposed to losses when the benchmark declines.
These capture ratios can be used to explain how a strategy aims to achieve specific goals related to market conditions. For example, “beats the market on the upside and protects on the downside” (you’d hope to see over 100% upside capture with less than 100% downside capture) or “capital preservation with risk targets below the overall market” (you’d expect to see lower than 100% upside capture with hopefully a very low downside capture).
Please note that it is most common to show these measures together (or to show total capture ratio that combines the two). Considering the “fair and balanced” requirements in the SEC marketing rule, it’s likely prudent to include both to explain the full picture.
For an aggressive strategy that is over 100% capture both on the upside and the downside or a capital preservation strategy that is under 100% both on the upside and downside, you ideally can still show that the total capture ratio is greater than 1. This demonstrates that the strategy is winning on the upside by a greater amount than it is losing on the downside or that protection on the downside more than offsets the lagging performance on the upside.
Conclusion
When it comes to investing, knowledge is power. Factsheets provide investors with valuable information to help them make informed decisions about your firm and strategies. When you provide them with a full picture of your performance that includes risk, they are more fully equipped to consider you for further due diligence.
Investment firms that understand these statistics and use them to help explain the story of their investment performance provide context and transparency in a saturated landscape of investment options.
Make sure to take the time to understand what these measures say about your performance each period and include that in some form of market commentary when you share your factsheets with prospects. This demonstrates how informed you are about the strategies you manage, how decisions made impact results, and what your plans are to address them.
Want to discuss how you can improve your factsheets with risk statistics? Schedule a free 30-minute brainstorm with one of our partners on which statistics you should include to help explain your investment performance.
GIPS Compliance in Marketing Materials: Demonstrating Your Competitive Advantage
August 23, 2023
15 min
In today's highly competitive financial landscape, your company must stand out and demonstrate its commitment to transparency and accuracy. One powerful tool at your disposal is the Global Investment Performance Standards (GIPS®).
We know how complicated it can be to become GIPS compliant and that’s exactly why we built Longs Peak – to do the heavy lifting for firms and simplify the verification process. By allowing us to tackle the behind-the-scenes work, we’ve helped hundreds of firms become compliant at a much faster rate than if they’d handled it internally – giving them the opportunity to quickly leverage their GIPS compliant status in their marketing and messaging.
By becoming GIPS compliant and incorporating GIPS compliance into your marketing materials, such as factsheets and pitchbooks, you can strengthen your credibility and trustworthiness among clients and prospects.
Let’s explore how to effectively utilize the GIPS standards in your marketing to help highlight your competitive advantage.
Understanding GIPS Compliance & Its Benefits
Before delving into marketing, let's review the fundamentals of GIPS compliance. The GIPS standards are a globally recognized set of ethical principles that provide a standardized framework for calculating and presenting investment performance to prospective investors.
By complying with the GIPS standards, you demonstrate that your performance results are genuine, comparable, and fairly presented. Moreover, GIPS compliance promotes transparency and instills confidence in potential investors, enhancing your marketability.
Highlighting Your Firm’s GIPS Compliance
After going through all the hard work to become GIPS compliant, it is important to share that status with the world so you can reap the benefits of your efforts! By including information about your firm’s GIPS compliance in your marketing, you instantly communicate your dedication to adhering to global best practices.
Trust is so important in the investment industry. By explaining how your firm is going above and beyond regulatory requirements to ensure your investment performance is presented in a fair and transparent manner helps demonstrate your firm’s trustworthiness and can help you stand out in an oversaturated landscape of options.
Tailoring the Message to Different Audiences
With any marketing effort, it’s important to consider your target audience. Understanding the needs, preferences, and concerns of that audience allows you to speak directly to their interests, fostering stronger connection and engagement.
When mentioning GIPS compliance, keep in mind that retail investors may be less familiar with the Standards and therefore may need more information to understand the benefits. Institutional investors tend to know about the Standards and likely need less explanation. By employing language that resonates with the target audience, you not only capture their attention but further build credibility and trust.
Advertising Your Firm’s GIPS Compliance
Now that we have emphasized the importance of highlighting your firm's GIPS compliance in your marketing materials, it is important to consider how this should be done. When mentioning GIPS compliance, there are some very specific disclosures that must be included. It is important that your firm does not state or imply that your firm is GIPS compliant without these disclosures.
Firms mentioning GIPS compliance in their marketing have the option either to follow the GIPS Advertising Guidelines or to attach a GIPS Report for the relevant composite or fund being marketed. You can download our checklists of what disclosures to include when following the GIPS Advertising Guidelines or when creating GIPS Reports.
For any marketing piece that includes a GIPS Report, we encourage firms to create a standalone page for the GIPS Report. The GIPS standards have specific requirements for reporting errors on the GIPS Report, so you want to limit information on that page to only what’s required and avoid the potential of having to report errors that could have been avoided if the information was kept separate.
Using Visuals to Enhance Understanding
GIPS Reports and their required disclosures tend to leave marketing teams feeling creatively stifled. But the goal of a good marketing presentation is to be engaging and digestible. Graphs, charts, and infographics can help convey complex performance data with clarity and impact.
Visual representations can be especially effective in illustrating return data and depicting how your strategies have outperformed benchmarks (i.e., growth of dollar line chart) over time. However, always ensure that the visual representations are aligned and never conflict with the information presented within the GIPS Report.
Incorporating Risk Statistics
Of course, no investment performance presentation is complete without discussing risk. There are a variety of risk statistics that can (and should) be used to demonstrate how each strategy you manage performs relative to risk. If you want to learn more about what risk statistics to include, you can read about the most common ones we see here.
Showcasing the Competitive Advantage
Beyond GIPS compliance, highlight the distinct features that set your investment strategies apart from the competition. Emphasize your expertise, team capabilities, and successful track record. While GIPS compliance is a powerful differentiator, showcasing your unique approach to investment management will further position your firm as a top choice for potential investors.
Wrap Up
By incorporating GIPS compliance into your marketing materials, you signal a commitment to transparency, accuracy, and investor protection. Emphasize the benefits of GIPS compliance, use visuals to enhance understanding, incorporate a discussion about risk and spotlight your competitive advantage. With these strategies in place, your marketing materials will become powerful tools for attracting and retaining investors, ultimately propelling your company to new heights of success.
Are you ready to leverage the power of GIPS compliance in your marketing materials? Schedule a call with one of our partners to elevate your credibility with investors and gain a competitive edge. Let us help you get started!
Recommended Post
Every so often we hear it: "Oh, you're one of the performance software tools."
It's an understandable assumption. We work in the same world as the software providers: composites, Global Investment Performance Standards (GIPS®), performance data, and the systems that produce all of it. From the outside, it can look like we're all selling the same thing.
We aren't. And if you're deciding how to support your performance and GIPS compliance work, the difference is worth understanding.
The short version: Longs Peak is a team of people who do the work with you, or for you. We're not a platform you log into. Behind the scenes, our tools help our team deliver faster, more consistent service. But no number leaves our hands without a real performance expert standing behind it.
Software Gives You a Capability. Someone Still Has to Run It.
A software provider hands you a tool. A good one can be powerful, and those systems offer a ton of capabilities. But once the tool is installed, the work to run it lands on your desk.
Someone on your team still has to load the data, set up and maintain the composites, review the results, chase down the account that looks off, and know the GIPS standards well enough to make the judgment calls. Software can calculate a return. It can't decide whether a new account belongs in a composite, explain why a number moved, or figure out what to do when a custodian changes its data feed.
What We Actually Do
At Longs Peak, we get our hands dirty, so you don't have to. In practice, that means:
- We manage your composites. Membership decisions, inclusion and exclusion, periodic updates, and the returns that come out the other end. We work alongside members of your team to get those questions answered and make the updates for you. The work gets done by a person who does it every day.
- We act as your GIPS expert. When a new strategy launches, a policy needs revisiting, or a gray area comes up, you have someone who knows the standards and has seen the situation before.
- We dig into your data. We look for outliers, accounts that are breaking composite rules, and other anomalies, before they end up in your reported performance and get caught in verification. Not only do we help identify potential issues, but we work with your team to help create the paper trail to provide an explanation if questioned by a verifier.
- We help with system issues. When your system isn't producing what you need, we get inside it and help work out why.
- We design the output. Once the data work is done, we turn it into beautifully designed, client-ready factsheets and reporting. And we understand this information from a performance, compliance, and design perspective.
- We help you communicate what matters most. For your prospects or a board of directors: which statistics support your story, and which just add noise? Those are communication choices, and we help you make them.
None of this is advice delivered from a distance. We maywork with you as a remote team, but we're not remotely hands-off. We work insideyour data, your systems, and your deadlines, the same way a colleague down thehall would. And when something needs fixing, we roll up our sleeves and fix it,so it’s off your plate and your to-do list.
Ways to Work With Us
Every firm is set up differently, so we don't force a single model.
- Fully outsourced. We run composite management on your behalf, start to finish. For firms without a dedicated performance team, this is often the cleanest answer.
- Part of your team. We work alongside your people, taking on the pieces that are heavy, specialized, or just hard to staff. To your colleagues, we're simply part of the performance team.
- Your GIPS expert on call. Your team runs the day-to-day, and we're there for the questions, reviews, and judgment calls that need someone who has seen it all before.
- Your marketing team. Your data is done and ready to be put to work. We turn it into polished factsheets and reporting for prospects, consultants, and boards, and help you decide which parts of your story deserve the spotlight.
Many clients start in one place and shift as their needs change. That flexibility allows us to grow alongside you and offer as much or little support as you need.
Why This Matters
Most firms don't struggle with GIPS compliance because they misunderstand a requirement. They struggle because the knowledge lives in one person's head, the team is stretched thin, or a system issue has been quietly sitting in the queue for months.
Software doesn't fix any of those problems. People do. Having an experienced team involved reduces key-person risk, frees your own staff for higher-value work, and means fewer surprises when verification or a regulatory review comes around.
A Question Worth Asking
If the person who runs your performance work were out for a month, who would pick it up? And if the honest answer is "we'd figure it out" or you simply don’t have an answer, it may be time to think about who else should be in the room.
We're happy to talk through where you are today and what kind of support would actually help. No software demo required. Email us at hello@longspeakadvisory.com.
GIPS® is a registered trademark owned by CFA Institute. CFA Institute does not endorse or promote this organization, nor does it warrant the accuracy or quality of the content contained herein.
If you manage money for institutional clients, you've probably heard some version of this sentence: "We can't consider your strategy unless you're GIPS compliant." For a lot of investment managers, that's the moment the Global Investment Performance Standards (GIPS®) stop being an abstract industry term and start being a business requirement.
This guide covers what GIPS compliance actually is, who needs it, what it takes to get there, and how to keep it running once you do. Wherever a topic deserves a deeper dive, we've linked to the longer article that covers it. Think of this as the map, with the detailed trail guides linked along the way.
What Is GIPS Compliance?
GIPS compliance means a firm calculates and presents its investment performance according to the GIPS which is a set of ethical, standardized rules for performance reporting created and administered by CFA Institute. At their core, the GIPS standards rest on two principles: fair representation and full disclosure.
In practice, that means a GIPS compliant firm can't cherry-pick its best-performing accounts to show a prospect. It has to group similar portfolios into composites, present the full history honestly, disclose the assumptions behind the numbers, and apply the same rules consistently across the entire firm.
GIPS compliance is voluntary. No regulator requires it. But it has become the closest thing the investment industry has to a common language for performance. This is often why so many institutional investors, consultants, and platforms require it before they'll even take a meeting.
Who Needs to Be GIPS Compliant?
Any investment manager who wants to compete for institutional business should take GIPS compliance seriously. That includes:
- RIAs and asset managers pursuing institutional mandates (pensions, endowments, foundations, OCIOs)
- Firms seeking placement on model delivery platforms, SMA platforms, or consultant databases
- Managers responding to RFPs where GIPS compliance is a stated requirement
- Firms that simply want a more defensible, standardized way to calculate and present performance — even without external pressure to do so
According to eVestment, roughly two out of three searches run by institutional investors and consultants in their database exclude firms that aren't GIPS compliant. If your strategy to scale your firm includes institutional or consultant-driven channels, GIPS compliance isn't optional in any practical sense, it's the price of admission.
That said, don't mistake GIPS compliance for a purely institutional tool. Even firms with no institutional ambitions benefit from the discipline it offers: consistent calculation methodologies, documented policies, and a defensible and repeatable process for measuring performance. That rigor tends to pay off internally long before a prospect ever asks for it. And every additional firm that complies strengthens the credibility of the standards industry-wide, which benefits compliant firms and investors alike. The question worth asking isn't whether GIPS compliance is relevant to your business, it's whether now is the right time to embark on the path to become GIPS compliant.
(Note: this guide focuses on investment managers. If you're an asset owner — a pension, endowment, or foundation — evaluating your own internal performance reporting, our asset owner GIPS compliance page covers considerations specific to that role.)
Is GIPS Compliance Required?
No. GIPS compliance is a voluntary standard, not a law or regulation, and the SEC doesn't require it. That part isn't where firms gettripped up.
What's worth understanding is how close many firms already are to GIPS compliance without ever setting out to pursue it. The SEC Marketing Rule requires advertised performance to be fair and balanced, substantiated, and — in most cases — presented net of fees. Those requirements weren't written to mirror the GIPS standards, but in practice they've pushed firms toward much of the same discipline: consistent calculation methodology, defensible net-of-fee treatment, and documentation that can withstand scrutiny.
That means a lot of SEC-registered advisers may already have some of the infrastructure GIPS compliance requires before they've ever considered pursuing it formally. If you're already calculating net returns consistently, applying one methodology across accounts rather than picking whatever looks best, and keeping documentation to back up what you advertise, the remaining work (constructing composites, writing the GIPS standards policies and procedures, and assembling GIPS Reports) is often a smaller lift than firms assume, especially if you hire a consultant like Longs Peak to help!
The frameworks aren't identical, and there are places where they diverge. The GIPS standards permit either gross- or net-of-fee presentation, while the SEC Marketing Rule requires net returns whenever gross is shown; when local law or regulation is stricter than the GIPS standards, firms follow the stricter rule and disclose the deviation. We've written a full breakdown of how that reconciliation works, including sample disclosure language, in Navigating GIPS Compliance When Local Laws Conflict. But those are details to reconcile, not reasons to start from scratch.
How to Become GIPS Compliant: The Building Blocks
GIPS compliance rests on four core components, and implementation generally means building them in this order.
1. Define the firm and scope the universe of portfolios. Compliance is claimed on a firm-wide basis, never at the composite, product, or portfolio level. Before anything else, a firm must define itself: which legal entities, offices, and business lines are included, and how the firm is held out to the public. This sounds simple but is often the most consequential decision in the entire process, especially for firms with multiple brands or affiliated entities. Once that's settled, inventory every account, pooled fund, and mandate that falls within the definition.
2. Build the GIPS standards policies and procedures manual (the "P&P"). This is the operational rulebook: how discretion is defined, how composites are constructed, how cash flows are handled, how errors get corrected. A strong GIPS standards P&P reflects what the firm actually does, not what looks good on paper. Documenting it now, before it's tested by a real-world edge case, saves a lot of pain later.
3. Construct composites and calculate performance. Discretionary portfolios with similar strategies are grouped into composites so performance is presented at the strategy level rather than as a cherry-picked account or model portfolio. Composite construction is typically where firms spend the most time, since it requires historical data review, judgment calls about discretion, and reconciliation across systems. Then asset-weight returns and calculate the required statistics for at least five years of compliant history(or since inception, if younger).
4. Create GIPS Reports and file the compliance notification. The GIPS Report is the compliant, disclosure-rich presentation of a composite's performance that must be given to every prospective client. It includes required statistics, fee treatment, and disclosures that give context to the numbers. Once GIPS Reports are complete, the firm files the GIPS Compliance Notification Form with CFA Institute, a final required step before compliance can be claimed, and one that must be renewed annually.
5. Verification (optional, but a good idea). An independent third party can test whether a firm's policies and procedures are designed appropriately and applied consistently firm-wide. It's not required, but it's widely expected in institutional circles (more on this below).
We've written a full phase-by-phase walk through, including the judgment calls that tend to trip firms up (like defining discretion and handling historical composite membership), in A Practical Framework for Implementing the GIPS Standards.
How long does this take? For most firms with a simple, straight forward structure, implementation can be complete in less than one month. For moderately complex firms or simple firms with longer track records, implementation often runs somewhere between three and six months from kickoff to a completed GIPS Report. Firms with complex legal structures, long historical track records, or messy underlying data should expect it to take longer. The upfront investment in earlier phases (firm definition and policy development) as well as the commitment from your team is what usually determines the timeline.
How much will it cost? One of the questions we hear most often is "what does it cost to become GIPS compliant?" The honest answer is that it depends on a lot of inputs. Two firms of similar size can land in very different places depending on how many composites and accounts they manage, how many years of history must be reconstructed, how complete existing records are, how clean the underlying data is, and how much back-and-forth it takes to resolve open questions along the way. Because of that, we scope every engagement individually rather than pricing it off a flat rate card. The factors below are the ones that most reliably move the estimate up or down. Thinking through them ahead of time makes for a much more productive first conversation.
What tends to drive cost:
Composites and accounts in scope: How many strategies need to be reported on, and how many underlying accounts roll up into them? Being larger doesn’t always mean it will cost more, but we typically find that more accounts or composites often means more work to determine their proper placement.
Years of history involved: Are you reconstructing several years (or since inception) of past performance or are you a brand-new firm just getting started? This becomes a bigger factor the longer the track record (which is often tied to data quality).
Quality of existing records: How complete and well-organized is your historical composite membership documentation? This is often the biggest swing factor. We regularly see firms come in confident that their data is clean, only to find once we're in the weeds that it isn't. Being honest about this up front, even where the answer is "we're not totally sure," helps the entire engagement team start with the same expectations rather than discovering the real scope midstream.
Verification plans: Do you intend to pursue verification alongside (or shortly after) the buildout? This adds coordination and review on top of the compliance work itself.
Existing GIPS compliance experience: Are you starting from a blank page or do you already have some policies, procedures, or a prior composite performance to build on? The more existing foundation you have, the better.
Responsiveness and internal bandwidth: How quickly will your team turn around data requests and answer questions? This affects the timeline most directly, but slow back-and-forth does add real hours too.
We like to meet firms where they are. That might mean managing the full project or helping with the pieces that are most challenging or resource-intensive. We can usually find a way to add value even when a full-scope engagement doesn’t make sense. It’s also worth keeping in mind that some larger providers of managed services have minimum fees or engagement sizes, which may make them less practical depending on your needs and budget. If you’re still unsure if this is the right time, check out our post The Case for Pursuing GIPS Compliance Before You Think you Need It.
Do You Need to Be Verified? No. Verification is voluntary under the GIPS standards. A firm can claim compliance without ever being verified.
That said, verification is generally worth pursuing, particularly for firms competing for institutional mandates where GIPS compliance is treated as table stakes. Verification provides independent assurance that a firm's policies and procedures are designed in line with the GIPS standards and applied consistently — which carries real weight with consultants and prospects performing due diligence. It also tends to create useful internal discipline, since the expectation of independent review keeps processes tighter throughout the year.
If you're earlier in your compliance journey or working within budget constraints, it's reasonable to build a solid compliance foundation first and pursue verification once the timing makes sense. For a detailed walkthrough of what the process actually involves, see our series, How to Survive a GIPS Verification.
GIPS Compliance and the SEC Marketing Rule
For US-registered investment advisers, GIPS compliance doesn't happen in a vacuum — it has to coexist with the SEC Marketing Rule. The two frameworks overlap in some places (both care about fair, substantiated, non-misleading performance) and diverge in others (fee treatment, required disclosures, what counts as an advertisement).
Firms that manage this well tend to build one governance framework that covers both — rather than treating GIPS compliance and marketing rule compliance as separate workstreams run by different teams. We cover what that coordination looks like in practice, including how GIPS Reports, factsheets, and pitchbooks should stay consistent with each other, in What Good GIPS Compliance Governance Looks Like in Practice.
Common Mistakes Investment Managers Make
After helping firms through this process for over a decade, the same handful of issues come up again and again:
- Treating GIPS compliance as a one-time project. Compliance is a firm-wide standard maintained continuously — not a binder that gets built once and shelved.
- A "department of one." When all GIPS compliance knowledge lives with a single person, the firm is one departure away from a serious continuity problem.
- Policies that don't reflect reality. A GIPS standards P&P that describes an idealized process — rather than what the firm actually does — creates real exposure during verification or a regulatory exam.
- Weak documentation of judgment calls. Decisions about discretion, composite redefinitions, or benchmark changes need a paper trail, not just an outcome.
- Underestimating the data work. Composite construction is as much a data reconciliation exercise as it is a compliance exercise. Firms that skip a thorough historical review often find problems later — usually during verification, which is the most expensive time to find them.
Maintaining Compliance: It Doesn't End at "Go-Live"
Becoming compliant is a milestone. Staying compliant is the actual job. The most common breakdowns aren't dramatic, they're small process gaps that compound: a portfolio added to a composite late, a significant cashflow handled inconsistently, or a new strategy launched without a composite decision being made.
The firms that stay clean build GIPS compliance into their regular monthly or quarterly performance cycle, assign clear ownership, and review their policies at least annually. We go deeper on what strong day-to-day governance looks like, including how to structure oversight without over-engineering it, in What Good GIPS Compliance Governance Looks Like in Practice.
The Business Case for GIPS Compliance
Compliance work rarely gets exciting attention internally, but the payoff is concrete. Firms that pursue GIPS compliance typically gain:
- Access to platforms, consultant databases, and institutional searches that require it as a baseline
- Credibility with allocators who use GIPS compliance as a proxy for operational rigor
- Consistency across performance, marketing, and compliance teams that often didn't exist before
- A cleaner foundation for scalability, since the process tends to surface and fix data issues before they become bigger problems
We've watched this play out directly with clients expanding into model delivery platforms and formalizing composite reporting for the first time. For real examples of how compliance translated into new business relationships, see From Compliance to Growth: How the GIPS Standards Help Investment Firms Unlock New Opportunities.
Frequently Asked Questions
What is GIPS compliance? GIPS compliance means a firm calculates and presents investment performance according to the Global Investment Performance Standards (GIPS®), a voluntary, globally recognized set of ethical standards administered by CFA Institute.
Is GIPS compliance mandatory in the United States? No. It's voluntary. The SEC does not require GIPS compliance, though many institutional investors, consultants, and platforms require it as a practical condition of doing business.
Who administers the GIPS standards? CFA Institute owns and administers the GIPS standards, including the GIPS Handbook, Guidance Statements, and the Q&A database that firms rely on for interpretive guidance.
How long does it take to become GIPS compliant? Most firms with a straightforward structure can complete implementation in three to six months. Firms with complex legal structures, long track records, or significant data cleanup will typically need more time.
What is a GIPS Report? A GIPS Report is the standardized, disclosure-rich presentation of a composite's or pooled fund's performance that a GIPS compliant firm must provide to every prospective client or investor.
Is verification required? No, verification is optional. However, it's widely viewed as a meaningful credibility signal, particularly for firms pursuing institutional business, and many allocators expect it in practice.
Can smaller firms become GIPS compliant? Yes. Firm size doesn't determine eligibility. Smaller firms often benefit from outsourcing implementation and ongoing maintenance to a consultant rather than building an internal GIPS compliance function from scratch.
Does GIPS compliance replace the need to follow the SEC Marketing Rule? No. They're separate obligations. A firm can be GIPS compliant and still need to independently satisfy SEC Marketing Rule requirements, particularly around net-of-fee presentation and substantiation of claims.
How Longs Peak Helps
Becoming and maintaining GIPS compliance touches every part of a firm: performance, operations, compliance, and marketing. That's a lot to coordinate on top of running the business.
At Longs Peak, we specialize in guiding investment managers through the entire journey. We help write policies and procedures, construct and maintain composites, prepare GIPS Reports, and manage the verification process alongside your chosen verifier. We've helped more than 250 firms and asset owners get there, and we stay with our clients well past go-live to keep compliance running smoothly year after year.
If you're weighing whether GIPS compliance makes sense for your firm, or you're already compliant and want a second set of eyes on how it's being maintained, let's talk.
GIPS® is a registered trademark owned by CFA Institute. CFA Institute does not endorse or promote this organization, nor does it warrant the accuracy or quality of the content contained herein.
Most managers assume that losing an allocation comes down to returns. Underperform the benchmark, underperform peers, and the mandate goes elsewhere. That happens, but it's not usually the reason a manager gets cut from a search after the numbers already looked competitive.
More often, it's something in how the performance was presented that made an allocator hesitate. A number that didn't match across two documents. A risk statistic nobody could explain. A question in due diligence that the manager couldn't answer cleanly. None of these are calculation errors. They're trust problems, and trust is what allocators are ultimately seeking when they write a check.
Here are the performance problems we see that cost managers allocations most often, and none of them start with the returns themselves.
The Numbers Don't Match Across Documents
An allocator pulls up your factsheet, your pitchbook, and your GIPS® Composite Report, and the composite's five-year return isn't quite the same in all three. Maybe it's a rounding difference, or the factsheet reflects a different "as of" date. The allocator doesn't know that, and they aren't going to assume the best. Inconsistency reads as carelessness, and carelessness in performance reporting raises an obvious question: what else isn't being checked?
This is why we push firms to treat marketing and GIPS compliance as one coordinated process rather than two departments working from different source files. Every document that leaves the building should trace back to the same underlying data.
This matters even more now that due diligence itself is being automated. Operational due diligence teams and consultants are increasingly running AI tools that cross-check pitchbooks, factsheets, DDQs, and regulatory filings against each other, flagging contradictions that used to slip through manual review. A rounding difference or a stale figure that a person might have missed a few years ago is exactly the kind of inconsistency these tools are built to catch instantly. Clean, consistent marketing materials aren't just good practice anymore — they're what it takes to pass a review that may happen before a person ever looks at your numbers.
Performance That Looks Selected, Not Reported
Showing your best-performing account, your best-performing period, or a composite with an unusually small number of accounts invites the question every allocator is trained to ask: what am I not being shown? Due diligence teams know that everyone can't be top quartile. The SEC Marketing Rule's anti-cherry-picking provisions exist because this pattern is common enough that regulators built rules around it, and sophisticated allocators are watching for it. If your performance can be read as overly flattering rather than representative, assume a diligence team will read it that way.
Wanting to lead with your best numbers is an understandable impulse. But diligence teams are trained specifically to spot it, and selective disclosure, even when every number in it is accurate, tends to read as a bigger warning sign than an honest, complete track record would. The stronger story is discipline: the periods where you held to your stated mandate and didn't deviate even while returns lagged. That's a harder story to tell than "we outperformed," but it's the one that actually holds up, because it shows you didn't drift toward whatever was working elsewhere just to keep pace. Chasing returns outside your stated process isn't skill, it's strategy drift, and allocators are trained to spot that just as readily as cherry-picked out performance.
Our advice: resist the instinct to lead with your best examples, and show the scenarios that build trust instead. We recommend showing the ones that demonstrate you stuck to your stated mandate, policies, and procedures, especially when the outcome wasn't your best quarter. Discipline under pressure is a more durable credential than a strong one-off time period, and it's the kind of evidence that holds up long after that number is forgotten.
Statistics You Show But Can't Explain
A page full of risk statistics doesn't build confidence on its own. It invites a follow-up question, and if the manager can't explain what a downside capture ratio of 85% says about the decisions actually made in the portfolio, the statistic becomes a liability instead of an asset. Allocators aren't just checking whether the numbers are favorable. They're checking whether the manager understands their own portfolio well enough to explain it. Statistics presented without interpretation signal that the second answer is “no.”
Likewise, a page of portfolio characteristics that have nothing to do with how the strategy is actually run are not doing you any favors. If you're not making decisions at the sector level, a sector breakdown doesn't tell an allocator anything about your process. If you don't manage individual position sizing, a top-ten holdings list is not adding value.
Your factsheet should be a roadmap for the conversation you want to have, not a checklist of everything other managers include. Every number on it should be something you can explain: how it got there, what decision it reflects, and what it says about how you manage money. A statistic that's only there because everyone else shows it likely isn't helping you if it doesn’t demonstrate active decision making. It's inviting a question you may not have a good answer to.
It's the same logic as a good resume. One padded with every certification, hobby, and unrelated past role doesn't read as impressive, it reads as overwhelming and maybe irrelevant, and it makes the reader work harder to find what actually matters to the job at hand. A factsheet works the same way. The strongest ones include only what's relevant to the case being made and make it easy to connect every line back to it.
No One Can Explain Why a Decision Was Made
This is the one that costs managers the most, and it's rarely about the numbers at all. An allocator asks why a composite was redefined, why a benchmark changed, or why a particular account was excluded, and the answer is a shrug or "that's how we've always done it." Undocumented decisions create the impression that performance is being managed reactively rather than governed intentionally. Firms that can point to a clear, contemporaneous record of why a judgment call was made close that conversation quickly. Firms that can't do this will leave the allocator wondering what other judgment calls haven't been documented either.
The Common Thread
None of these problems are really about whether the strategy performed well. It comes down to whether the story behind the numbers holds up consistently under scrutiny. Allocators aren't just buying returns. They're also buying confidence that what they're being shown today will still be true, and still explainable, a year from now.
The fix isn't more disclosure for its own sake. It's making sure everything across your performance reporting tells the same, well-documented story before an allocator ever has the chance to ask why it doesn't.
GIPS® is a registered trademark owned by CFA Institute. CFA Institute does not endorse or promote this organization, nor does it warrant the accuracy or quality of the content contained herein.
