08 May 2007 Financial Alert -
manager scores performance reporting first
by Anthony Davies
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Niche wholesale fund manager MGH Asset Management has set a first
for the NZ industry, as the first fund manager to comply with GIPS
- Global Investment Performance Standard – a set of ethical
principles introduced and administered by the CFA Institute to
establish a globally standardised, industry-wide approach to reporting
MGH Asset Management managing director, Mike Gibbs-Harris, says
his firm has become GIPS-compliant because it's expected of managers
on his target markets. "Because we're dealing with foreign
investors, they're used to certain standards, and GIPS is one of
them," he says.
Since it was introduced in 1999 (and subsequently relaunched
in 2005), GPIS has now been almost universally adopted by US and
managers, and is now also making inroads into Europe and Asia-Pacific.
Last week in Australia, IFSA (Investment and Financial Services
Association) adopted GIPS as a member standard. It will take effect
from 1 July.
GIPS help to facilitate a dialogue between investment managers
and their prospective clients about the critical issues as to how
an investment management firm has achieved performance results
that can help determine future investment strategies," IFSA
chief executive Richard Gilbert told Money Management.
Australia is increasingly viewed as a global financial services
centre, and internationally recognised benchmarks for performance
are effectively a ‘common language’ understood around
Back in New Zealand, Investment Savings and Insurance Association
(ISI) chief executive Vance Arkinstall says ISI is currently reviewing
all of standards and codes of practice, and considering GIPS as
part of that review is one the agenda. However, having a serious
look at it probably won't happen until at least next year as "everything
is on hold pending the [Ministry of Economic Development’s]
Review of Products and Product Providers".
Mint Asset Management chief investment officer Rebecca Thomas
is used to working in a GIPS-compliant industry from her time as
UK-based fund manager, however she's not convinced introducing
it in New Zealand would be cost-effective. While it's undoubtedly
useful, she says, she adds that becoming GIPS-compliant requires
calibrating a great deal of historical data as well as ongoing
maintenance costs. "It's a massive workload and the compliance
costs are significant."
In her view, New Zealand doesn't have the scale to make it worthwhile.
Gibbs-Harris disagrees. "From a fiduciary point of view, if
people are investing with you they have to be able to trust your
numbers," he says.
It's similar story from James Fairbairn, portfolio director at
GAM in London. "GIPS provide clients with a clear understanding
of a firm’s performance over time. What you see is what you
get. This is important because asset managers need to ensure that
the numbers they present provide the highest degree of transparency
possible on performance that they are achieving with the money
entrusted to them for management," he told The Financial Times.
He adds that traditional marketing of performance figures has
been known to focus on a model portfolio, or a best-performing
giving investors little realistic idea of what to expect from their
own assets. However GIPS provides a size-weighted average return
to investors net of fees and expenses.
Carl Bacon, who helped develop GIPS back in the mid 1990s, is
even more blunt. "It's a question of basic hygiene. If an asset
manager is not compliant with GIPS, you have to ask: 'Why not?
Do they have weak systems and inadequate processes? Or do they
not believe in best practice?'
You know you can rely on the presentation when an asset manager
is GIPS compliant. If they are not, the chances are that the data
will have been massaged, wittingly or unwittingly, in the interests
of putting their best foot forward," he says.
2007 financialalert Limited.
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