Verification is the review of an investment management firm's performance measurement processes and procedures by an independent third-party verifier. Verification assesses whether the firm has complied with all the composite construction requirements of the GIPS standards on a firm-wide basis. It also tests whether the firm's policies and procedures are designed to calculate and present performance in compliance with the GIPS standards.
The GIPS standards set forth criteria about the knowledge requirements of verifiers in the areas of the GIPS standards, applicable laws and regulations, the corporate structure of the firm, the firm's policies and procedures, portfolio valuation basis, and performance calculations.
Download a print-friendly version of The GIPS Standards and the Benefits of Verification (PDF).
Benefits of Verification
Third-party verification brings additional credibility to your firm's claim of compliance and supports the overall guiding principles of the GIPS standards: fair representation and full disclosure of a firm's investment performance.
Verification may also provide an opportunity to increase your firm's performance measurement team's knowledge and improve the consistency and quality of the firm's compliant presentations. Additionally, verification may provide improved internal processes and procedures as well as marketing advantages to the firm.
The GIPS standards also set forth minimum procedures that verifiers must follow when conducting a verification, enhancing the credibility of the verification process.
The application of the GIPS standards to the specific situations of your individual investment management firm requires your firm to decide on the policies, definitions, and approaches to all provisions. Undergoing verification brings in additional expertise that can comment on the implementation of the GIPS standards and their application to specific scenarios.
Verification is intended to provide your firm and its existing and prospective clients with additional confidence in your firm’s claim of compliance.
The increasing importance of a firm’s verified status is often a market-driven result of increased awareness among investors and consultants and can be an important factor in manager searches.
For all of these reasons, the GIPS Executive Committee encourages firms to undergo verification and believes it represents best practice.
How to Choose a Verifier
Materials to Provide to Your Verifier
Chapter IV of the GIPS standards details the required verification procedures that verifiers follow when conducting a verification. All verifications are different because each firm is unique; however, these are the minimum procedures a verifier will complete before issuing a verification report.
More Information About Verification
Chapter IV of the GIPS standards and the Guidance Statement for Verification (PDF) provides additional information about verification. If you have any questions, please contact us.