GIPS® Standards Case Study: One Asset Owner’s Efforts to Attain Compliance
Asset owners are a growing faction of entities seeking to attain compliance with the Global Investment Performance Standards (GIPS®). As compliance with the standards becomes more essential in building business partnerships and preparing for the future of capital markets, more asset owners are committing to the task. In a recently published case study, CFA Institute highlights the efforts of the Asia-Pacific-based insurance group, AIA Investments, in transitioning its global operations to follow the GIPS standards.
AIA sought GIPS compliance to help the long-term advancement of the organization by complying with a globally recognized framework for performance reporting. Another motivation was to increase its data’s uniformity and integrity among its many divisions and businesses. In addition, there was a need to build a scalable data system that could be applied to future projects.
As the first insurer to claim GIPS compliance as an asset owner, AIA was compelled to establish its own unique compliance structure. The process created was comprised of seven steps:
- Making the choice to adopt the GIPS standards for its global best practices conversion.
- Determining the utility and impact of the standards by conducting an internal feasibility study.
- Contacting teams and stakeholders that would be affected by the requirements of the GIPS standards.
- Deciding which data to include in performance reports and moving data and systems to one centralized location.
- Engaging an independent verifier and implementing changes to the business’s operations.
- Using new performance reports to enhance the investment process.
- Maintaining compliance through the establishment of an in-house GIPS standards committee.
AIA acknowledges that the shift to using benchmarks when managing fixed-income insurance portfolios was a substantial task across the organization. They overcame the challenge by determining the specific use of benchmarks and assuring portfolio managers that benchmarks would be used as a tool, not a replacement for portfolio objectives. Ultimately, AIA found that implementation of the GIPS standards improved collaboration among departments and raised operational efficiency.
The firm has benefitted from adopting the GIPS standards in several other ways, like making more informed investment decisions through increased understanding of portfolio performance; having more credibility among regulators, shareholders, and internal stakeholders; and standardizing reporting expectations, terminology, and the broader reporting framework across the firm’s 18 regional markets.
Those involved with the implementation of the GIPS standards recommend others with the same goal make a few considerations before beginning the process. They advise asset owners to view the GIPS standards as a tool for improving infrastructure over time; to engage expert consultants to help with the transition to compliance; and to frequently communicate with every affected departments to ensure all steps of the process, outcomes, and benefits are understood.
AIA’s process of establishing compliance with the GIPS standards was a significant undertaking. However, the long-term benefits of compliance will continue to impact AIA as capital markets shift to adopt uniform performance reporting standards worldwide.
A thorough read of the case study will put the process into better context for asset owners who believe this endeavor may not have benefits that outweigh the commitment needed. If you are interested in learning more about the GIPS standards or seeking to claim compliance, Fairview Performance Services can help. Our in-house experts will discuss your unique needs and concerns and work to implement a project management plan that can make the initiative efficient and effective. Contact us today for more information about how to start the compliance process.
