# Gips Compliance > Ensure firms claiming GIPS compliance under the CFA Institute Global Investment Performance Standards satisfy requirements for composite construction, performance calculation, presentation, and verification. Use when the user asks about building composites, time-weighted return calculation under GIPS, GIPS Reports and pooled fund reports, error correction policies, wrap fee or SMA program perform… - **Type:** Skill - **Install:** `agentstack add skill-joellewis-finance-skills-gips-compliance` - **Verified:** Yes — security-reviewed for prompt injection and unsafe behavior - **Seller:** [JoelLewis](https://agentstack.voostack.com/s/joellewis) - **Installs:** 0 - **Category:** [Agent Skills](https://agentstack.voostack.com/c/agent-skills) - **Latest version:** 0.1.0 - **License:** MIT - **Upstream author:** [JoelLewis](https://github.com/JoelLewis) - **Source:** https://github.com/JoelLewis/finance_skills/tree/main/plugins/compliance/skills/gips-compliance ## Install ```sh agentstack add skill-joellewis-finance-skills-gips-compliance ``` Requires the [AgentStack CLI](https://agentstack.voostack.com/docs/cli). Works with Claude Code, Cursor, and any MCP-compatible agent. ## About # GIPS Compliance — Global Investment Performance Standards Regulatory status current as of June 2026 — verify effective dates, dollar thresholds, and pending rulemakings against current SEC/FINRA/FinCEN and CFA Institute sources before advising. ## Core Concepts ### GIPS Overview and Applicability The Global Investment Performance Standards are voluntary ethical standards maintained by the CFA Institute for calculating and presenting investment performance. GIPS are not law — no regulator mandates compliance — but they are widely adopted by investment managers seeking institutional mandates, as many institutional investors, consultants, and plan sponsors require or strongly prefer GIPS-compliant track records. GIPS applies to "firms," defined as an investment firm, subsidiary, or division held out to clients or prospective clients as a distinct business entity. The definition of the firm is foundational: a firm must define itself consistently and cannot change its definition to manipulate compliance. A firm claiming GIPS compliance must do so on a firm-wide basis. A firm cannot claim compliance for select composites or strategies while excluding others — compliance is all or nothing. The 2020 edition of GIPS (effective January 1, 2020) is the current standard, replacing the 2010 edition. Key changes in the 2020 edition include provisions for pooled fund reports, enhanced requirements for overlay strategies, broader applicability to asset owners, and streamlined advertising guidelines. The 2020 edition maintains the core principles that have defined GIPS since inception: fair representation of performance, full disclosure of material information, and comparability across firms and time periods. GIPS compliance is self-declared — there is no central authority that grants or certifies GIPS compliance. A firm claims compliance by including a specific compliance statement in its GIPS-compliant presentations. However, the claim carries weight precisely because it binds the firm to a comprehensive set of requirements that can be (and frequently are) tested through independent verification. ### Composite Construction Composite construction is the foundation of GIPS compliance. A composite is an aggregation of one or more portfolios managed according to a similar investment mandate, objective, or strategy. The purpose of composites is to prevent cherry-picking — firms cannot show only their best-performing accounts while hiding underperformers. **Inclusion requirements.** All actual, fee-paying, discretionary portfolios must be included in at least one composite. The key terms are: - **Actual portfolios** — only real portfolios with real assets. Simulated, model, or backtested portfolios are never included in composites. - **Fee-paying** — portfolios that pay advisory fees to the firm. Non-fee-paying portfolios (such as employee accounts or pro bono accounts) may be included in composites, but the firm must disclose their inclusion. - **Discretionary** — portfolios over which the firm has full investment authority to implement its intended strategy. Portfolios with client-imposed restrictions that materially prevent the firm from implementing its strategy are non-discretionary and must be excluded. **Timing of inclusion.** New portfolios must be included in their respective composites on a timely and consistent basis. The GIPS standards recommend inclusion at the beginning of the next full measurement period after the portfolio is funded and invested. For example, if a new portfolio is funded on March 15 and the firm uses monthly measurement periods, the portfolio would be included in the composite beginning April 1. The firm must apply the same timing policy consistently across all composites. **Exclusion of portfolios.** Portfolios must be excluded from composites only for valid, documented reasons: - Non-discretionary status (client-imposed restrictions that prevent strategy implementation) - Portfolios below a stated minimum asset level (if the firm has set a minimum, it must apply it consistently and disclose it) - Portfolios in the process of funding or liquidation (significant cash flows that temporarily prevent strategy implementation) **Terminated portfolios.** When a client terminates a portfolio, the portfolio must remain in the composite through the last full measurement period that the portfolio was under management. The terminated portfolio's historical returns remain in the composite permanently — they cannot be removed after the fact. **Prohibition on retroactive composite creation.** Firms cannot create composites retroactively to cherry-pick favorable performance histories. Composite creation dates must be documented and disclosed. **Composite switches.** If a portfolio's mandate changes and it moves from one composite to another, the switch must be documented with the effective date. Historical returns remain in the original composite; the portfolio's returns are included in the new composite only from the switch date forward. **Documentation.** All composite membership decisions — inclusions, exclusions, switches, and the rationale for each — must be documented and retained. ### Performance Calculation Requirements GIPS requires time-weighted returns (TWR) to eliminate the distorting effects of external cash flows (which are controlled by the client, not the manager). The goal is to measure the manager's investment skill independent of client-directed deposits and withdrawals. **Valuation requirements.** Firms must use actual (not estimated) valuations. Prior to January 1, 2010, quarterly valuation was the minimum; since then, firms must value portfolios on the date of all large external cash flows, or more frequently. Best practice (and required for many institutional composites) is daily valuation. **Large cash flow policy.** Each firm must define what constitutes a "large" external cash flow and apply the definition consistently. Common thresholds are 10% of portfolio value, though firms may set lower thresholds. Portfolios must be valued on the date of any cash flow that meets the threshold. **Return calculation methods:** - **True daily valuation** — the gold standard. Portfolio is valued every day, and returns are calculated daily, then geometrically linked. Eliminates all cash flow timing distortion. - **Modified Dietz** — an approximation method that weights cash flows by the fraction of the measurement period they were present. Acceptable when the firm does not have daily valuations, but accuracy decreases with large or frequent cash flows. **Gross-of-fees and net-of-fees returns:** - **Gross-of-fees return** — the total return of the portfolio reduced only by actual trading expenses (commissions, transaction costs). Gross returns reflect the manager's investment skill before the impact of advisory fees. - **Net-of-fees return** — gross-of-fees return reduced by investment management/advisory fees. Net returns reflect the return actually experienced by the client (before taxes). Firms must present at least one of gross-of-fees or net-of-fees returns in GIPS-compliant presentations. If only one is presented, it must be clearly labeled. Many institutional clients and consultants expect to see both. If model or estimated fees are used to calculate net returns (because actual fees are not deducted at the portfolio level), the methodology and fee assumptions must be disclosed. **Composite return calculation.** Composite returns must be calculated by asset-weighting the individual portfolio returns, using beginning-of-period values or a method that reflects the timing of cash flows (such as beginning-of-period values plus weighted cash flows). Equal-weighted composite returns may be presented as supplemental information but cannot replace the required asset-weighted composite return. **Prohibition on linking non-actual performance.** Firms must not link simulated, model, backtested, or hypothetical performance with actual performance. A firm cannot show a backtest from 2015-2019 followed by live composite returns from 2020 onward as a continuous track record. If supplemental information includes hypothetical performance, it must be clearly labeled and segregated from actual composite results. ### Presentation and Reporting Requirements GIPS-compliant presentations (also called "GIPS Reports" in the 2020 edition) are the primary vehicle through which firms communicate composite performance to prospective clients. The presentation requirements are detailed and specific. **Required elements of a GIPS-compliant presentation:** there are eleven required elements (composite description; benchmark description and returns; number of portfolios; composite and total firm assets; internal dispersion; three-year ex-post standard deviation; annual returns; composite creation date; fee schedule; the prescribed compliance statement; and availability of the composite list). Load `references/presentation-elements.md` for the full element-by-element detail when drafting or reviewing a GIPS Report. **Complete annual periods.** Firms must present complete annual performance (January 1 through December 31, or the firm's fiscal year). Firms cannot present only cherry-picked favorable time periods. Partial-year returns are presented only for the composite's inception year or the current year-to-date (if the presentation is prepared mid-year). **Supplemental information.** Any performance information beyond the required elements (such as attribution analysis, sector breakdowns, or characteristics) must be labeled as "Supplemental Information." Supplemental information must not contradict or be inconsistent with the required GIPS presentation and must be clearly distinguished from the required elements. **Currency.** The currency used for reporting must be disclosed. If composite returns are presented in a currency different from the portfolios' base currencies, the conversion methodology must be disclosed. ### Verification Verification is an independent review of a firm's GIPS compliance performed by a qualified third party. Verification is optional under GIPS but is strongly recommended by the CFA Institute and is increasingly expected by institutional investors and consultants. **Two levels of assurance:** 1. **Firm-wide verification** — the verifier assesses whether (a) the firm has complied with all the GIPS composite construction requirements on a firm-wide basis, and (b) the firm's policies and procedures are designed to calculate and present performance in compliance with GIPS. Firm-wide verification does not test the accuracy of individual composite returns. 2. **Performance examination (composite-level)** — a deeper review of a specific composite's performance calculations. The verifier tests whether the composite's returns have been accurately calculated and presented in accordance with GIPS. A performance examination can only be performed after firm-wide verification has been completed for the same period. **Scope and duration.** Verification covers a minimum of one year but is typically performed for the full period of the firm's claimed GIPS compliance. Many institutional clients and consultant databases require verification covering the entire track record. Once engaged, most firms continue verification annually. **Limitations.** Verification provides a level of assurance but does not guarantee the accuracy of any specific composite presentation. The verifier relies on information provided by the firm, and the scope of testing is not as comprehensive as a financial statement audit. Verification reports typically include language clarifying these limitations. **Selecting a verifier.** The verifier must be independent of the firm. Most GIPS verifiers are accounting firms, performance measurement consultants, or specialized GIPS compliance firms. The firm should evaluate the verifier's GIPS expertise, industry experience, and the depth of testing procedures. **Verification report.** The verifier issues a verification report covering the specific time period reviewed. If verification is obtained, the firm's GIPS compliance statement must be updated to reflect the verification status and the periods covered. ### Error Correction Firms claiming GIPS compliance must have documented policies and procedures for identifying, evaluating, and correcting errors in composite performance. **Materiality thresholds.** The firm must establish materiality thresholds that define when an error is significant enough to require reissuance of corrected GIPS-compliant presentations. Materiality thresholds should be specific and quantitative — for example, an error is material if it changes composite returns by more than 50 basis points for any annual period, or if it changes the composite's ranking relative to the benchmark (outperformance to underperformance or vice versa). Thresholds may vary by composite based on the strategy's expected return range. **Material errors — correction and reissuance:** - Correct the error in all affected periods. - Reissue corrected GIPS-compliant presentations to all parties who received the erroneous version (prospective clients, consultants, databases, verifiers). - Disclose the nature of the error and the correction within the presentation or in an accompanying communication. - Notify the firm's verifier (if applicable) of the error and correction. **Immaterial errors — prospective correction:** - Correct the error going forward (prospective correction). - No reissuance of previously distributed presentations is required. - The firm should still document the error, its impact, and the decision not to reissue. **Documentation.** All errors must be documented regardless of materiality, including: - The nature and cause of the error - The periods and composites affected - The quantitative impact on composite returns - The materiality assessment and determination - The corrective actions taken - The date corrections were implemented **Error prevention.** Robust error correction policies should be paired with preventive controls: automated reconciliation of portfolio returns, systematic composite membership reviews, periodic recalculation of composite returns, and independent review of GIPS-compliant presentations before distribution. ### Bundled Fees and Wrap/SMA Programs GIPS includes special provisions for wrap fee and separately managed account (SMA) programs, recognizing that the fee structures and distribution models differ from traditional advisory relationships. **Wrap fee/SMA composites.** Firms must create separate composites for wrap fee/SMA portfolios if the fee structure causes these portfolios to have materially different net returns compared to non-wrap portfolios managed under the same strategy. In practice, most firms maintain separate composites for their wrap/SMA business. **Return presentation for wrap composites:** - **Pure gross-of-fees returns** — returns that have not been reduced by any fees, including trading costs (which are typically bundled into the wrap fee). Pure gross returns are useful for comparing investment skill across managers, since wrap fees vary by sponsor. - **All-in net-of-fees returns** — returns reduced by the entire wrap fee (which includes advisory, trading, custody, and sponsor fees). This reflects the actual return to the end investor. Firms must present either pure gross-of-fees or net-of-fees returns (or both) for wrap/SMA composites. The methodology for calculating returns and the fees deducted must be clearly disclosed. **Model performance and overlay strategies.** GIPS 2020 introduced provisions allowing the use of model performance under specific conditions for overlay strategies (e.g., a manager that provides a model portfolio to the SMA sponsor, with the sponsor executing trades). Model performance may be presented only if the manager does not have discretion over the ac … ## Source & license This open-source skill is cataloged on AgentStack and links to its original source — we do not rehost the code. - **Author:** [JoelLewis](https://github.com/JoelLewis) - **Source:** [JoelLewis/finance_skills](https://github.com/JoelLewis/finance_skills) - **License:** MIT Install and usage instructions live in the source repository linked above. ## Pricing - **Free** — Free ## Security capabilities Automated source analysis of v0.1.0 — what this tool can access: - **Network access:** no - **Filesystem access:** no - **Shell / process execution:** no - **Environment & secrets:** no - **Dynamic code execution:** no *"Yes" means the capability is present in the source — more access means more to trust, not that it is unsafe.* ## Versions - **0.1.0** — security scan: passed — Imported from the upstream source. ## Links - Listing page: https://agentstack.voostack.com/l/skill-joellewis-finance-skills-gips-compliance - Seller: https://agentstack.voostack.com/s/joellewis - Browse the marketplace: https://agentstack.voostack.com/browse --- Listed on AgentStack — the marketplace for AI agent skills and MCP servers. 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