Investment Advisor Seeks Assistance with Becoming GIPS Compliant

The Client

The Investment Advisor is a privately-owned investment management firm that follows a disciplined, value-based investment approach. The Investment Advisor’s principals have extensive experience in the investment management business and in managing the assets of high-net-worth individuals and institutions.

The Opportunity

As the Investment Advisor continued to grow its assets under management, new opportunities began to emerge. One such opportunity was to manage assets for a large high-net-worth client through a sponsor program. The sponsor had a rigorous set of criteria it used in selecting investment managers. These criteria included requiring the Investment Advisor to be GIPS compliant and to have the claim of GIPS compliance verified by a firm acceptable to the sponsor. At the time, the Investment Advisor was not GIPS compliant.

The Solution

In searching for a partner to help guide the Investment Advisor to GIPS compliance, they reached out to their investment industry contacts, which led them to Kreischer Miller. Having worked with other managers seeking GIPS compliance, we laid out an approach involving a pre-verification phase – which included an initial assessment of key issues and guidance on options for attaining GIPS compliance.

During the pre-verification phase, we utilized highly experienced directors and managers to gain a thorough understanding of the systems and controls in place. We met with the Investment Advisor to discuss the following:

  • Composite construction and inclusion/exclusion policies
  • The firm’s definition of discretion
  • Existing policies and procedures and the requirements of the GIPS standards
  • The systems used for portfolio accounting and composite maintenance
  • Reconciliation processes
  • The performance presentation creation process and required disclosures
  • Other issues that needed attention and oversight

This pre-verification phase allowed the Investment Advisor to get immediate feedback on where it needed to focus in order to achieve GIPS compliance. As the firm worked on achieving GIPS compliance, we served as a resource to help guide it through the process. Many of the Investment Advisor’s internal procedures were tightened and additional checks and balances were implemented during the pre-verification phase.

The Outcome

After the pre-verification phase was complete, we performed a firm-wide verification. The Investment Advisor provided its GIPS verification report to the sponsor and won the large high-net-worth client.

GIPS compliance has become a requirement for investment firms to win new clients, especially for those investment firms that serve institutional and high-net-worth clients on sponsor platforms. Working with Kreischer Miller helped put the Investment Advisor in a position to compete for this type of business going forward.