How to Create a Distribution Log for GIPS Reports
Matt Deatherage, CFA
March 31, 2021
GIPS compliant firms must make every reasonable effort to provide a GIPS Report to all prospects (excluding broad distribution pooled fund investors), regardless of whether the prospect knows about GIPS, cares about GIPS or asks for a GIPS Report.
The requirement to distribute GIPS Reports (formerly called Compliant Presentations) is not new; however, under the 2020 Edition of the GIPS standards, this rule expanded to require those claiming GIPS compliance to demonstrate that their GIPS Reports are distributed to prospects. In other words, a log of the distributions must be maintained.
Verifiers are also now required to test that this distribution is happening, so it is essential that some sort of log can be provided to your verifier to successfully get through the verification process.
If you are not prepared for this new requirement, we suggest you keep reading!
Why is Distribution of GIPS Reports a Requirement?
The fundamental aim of GIPS compliance is transparency and consistency in the way firms present investment performance to prospects. Firms providing GIPS Reports to all qualified prospects (and asset owners providing GIPS Reports to their oversight boards) improves transparency in the industry and standardizes reporting. Standardized reporting allows prospects evaluating managers with similar strategies to make the comparison easier and more meaningful.
Requiring the distribution of GIPS Reports helps get this information into the hands of prospects that may not know to ask for it but could benefit from reviewing the information prior to making their investment decision.
Who Needs to Receive a GIPS Report?
GIPS compliant firms must provide a GIPS Report to all qualified prospects. The terms “prospective client” (for segregated account prospects) and “prospective investor” (for pooled fund prospects) are defined in each firm’s GIPS policies and procedures document to ensure it is clear who must receive a GIPS Report. While firms may modify the definition to fit their sales process and business model, most firms craft this definition around two criteria:
- The prospect has expressed interest in a particular composite/pooled fund.
- The prospect is qualified to invest in this composite/pooled fund (i.e., they meet any applicable minimum asset levels and your firm would be willing to take them on as a client).
A prospect is required to receive a GIPS Report for the composite or pooled fund they are interested in once meeting the definition outlined in the firm’s GIPS policies and procedures. If a prospect remains a prospect for more than 12 months, the GIPS Report must be provided again since it will contain another year of annual statistics.
Current clients do not need to receive a GIPS Report for the composite or pooled fund they are invested in; however, if they become a prospect of one of your other composites or pooled funds, they must be provided with the respective GIPS Reports.
It is important to note that databases populated with composite or pooled fund performance are considered prospects and, therefore, must receive a GIPS Report. If there is no opportunity to upload the GIPS Report, then it must be sent to your contact at the database. Similarly, when responding to a request for proposal (“RFP”) that provides information for a composite or pooled fund, your response must include the GIPS Report for the strategy discussed in the RFP.
Any outside parties that market your strategies on your behalf must also be treated as prospects and receive GIPS Reports. This includes third-party financial advisors, wrap sponsors, or anyone else that sells your strategies to their clients.
GIPS Report distribution requirements are a bit different for asset owners since they do not have prospects. GIPS compliant asset owners are required to provide GIPS Reports to their oversight board at least annually.
How to Provide a GIPS Report
GIPS Reports must be delivered directly to the prospect. This can be in hardcopy or electronic form, but cannot require the prospect to navigate to find it. In other words, you can email it as an attachment or using a link that directly opens up to the GIPS Report, but you cannot simply disclose that the GIPS Reports are available on your website, requiring the prospect to retrieve it themselves.
Firms most commonly include the GIPS Report as an appendix to the pitchbook provided to prospects as a standard part of the sales process.
To be clear, you are not required to provide all of your GIPS Reports to every prospect, rather, you are only required to provide the GIPS Report for the composite or pooled fund the prospect is interested in and qualified for.
How to Create a GIPS Report Distribution Log
Maintaining a log of all GIPS Report distributions is the best way to ensure you can demonstrate that GIPS Reports are provided to all prospects. Typically, this log includes:
- Date the GIPS Report was sent
- Recipient of the GIPS Report
- Firm representative that sent the GIPS Report
- Contact information of the recipient
- Composite/limited distribution pooled fund included in the GIPS Report
- Version of the GIPS Report or file name if multiple versions are maintained
- How the GIPS Report was distributed
- Future deadlines for distribution (making sure the team sends an updated version of the GIPS Report 12 months later if the prospect is still defined as a prospect at that point in time)
There is no right or wrong way to track and monitor distribution efforts, as verifiers will accept any format that clearly demonstrates that the required distribution is taking place. It is common to leverage existing CRM systems, use excel spreadsheets or word documents to create these logs. We recommend leveraging any existing systems for tracking distribution and if none exist, use a spreadsheet (here’s a template to get you started). If you are using your CRM, make sure to tag the documentation so a report of the distributions can be exported and provided to your verifier when requested.
Remember, this is a requirement for all GIPS compliant firms and asset owners, regardless of whether they are verified or not. If you have any questions on this requirement or any other aspects of the GIPS standards, please do not hesitate to contact us.