News
FOCUS - Summer 2002
Is GIPS On Your Chief Executive's Agenda?
Industry comment by Roy Stockell, Partner for Ernst and Young
In an environment of inconsistent markets, reducing revenues and cost controls, how does the performance team ensure that their projects remain firmly on the Chief Executive's agenda? More importantly, how do they ensure that they have the appropriate budget allocated, and keep that budget, to ensure they meet their GIPS objective?
Obviously it is important to ensure that the Chief Investment Officer and the Marketing Director are involved in, and support, GIPS compliance. However, if it can be demonstrated that GIPS compliance can meet a wider agenda, then clearly this will further protect the performance budget.In particular, if it can be demonstrated that GIPS compliance can support the Chief Executive's agenda, the performance team can have a higher level of confidence that their allocated budgets will be maintained.
Most asset managers are facing many competing issues including:
- Recession - better performance for less cost
- Distribution - more product to more markets at a lower unit cost
- Operational efficiency - maintaining quality in an ever more demanding and regulated environment whilst controlling the cost
A well-managed and consistently implemented GIPS project can enhance each of these areas.
A consistent internal calculation and presentation methodology for performance will, as a minimum, contain costs. Indeed, cost reductions can be achieved if the organisation looks for economies of scale with regard to systems, people and process. This will avoid the need to have multiple, often independent, calculations, for each of an asset manager's target markets.
AIMR have identified GIPS as the superior set of standards. As a result, over 20 countries have adopted GIPS. By achieving compliance, asset managers can more readily market to, and service, global mandates. In particular, when marketing in North America, GIPS compliance is mandatory and therefore, not being compliant will inhibit marketing to that market.
In a world where regulation is increasing, and the pressure for the industry to self regulate intensifies, an asset manager can demonstrate their commitment to transparency of the investment performance by adopting and promoting GIPS compliance.
The role of the performance professional is no longer a supporting role for the investment managers. It is incumbent upon them to ensure that they promote the full benefits of GIPS compliance to the entire top team within their organisation, including the Chief Executive. Once that attention has been gained, it is critical that the compliance project is run as a project, adopting all the communications, controls, disciplines and metrics of any well managed project. It is also important to ensure that peoples' expectations are well managed. GIPS compliance is neither easy nor quick. Indeed it is a complex project. However, once implemented the benefits are easy to realise.