Historically, there has been little uniformity in how hedge fund managers present performance results. As a result, hedge fund investors have faced difficulty in comparing returns across managers. At the same time, the Global Investment Performance Standards (GIPS) – a set of voluntary best practices designed to ensure consistency in the presentation of performance results, and one of the few potential sources of uniformity – have lacked meaningful guidance for hedge fund managers. This changed in 2012, when the GIPS Executive Committee issued the Guidance Statement on Alternative Investment Strategies and Structures (Guidance Statement) to provide hedge fund-specific guidance. Since then, institutional investors and their consultants have frequently encouraged hedge fund managers to present performance results in compliance with GIPS. See “Getting to Know the Gatekeepers: How Hedge Fund Managers Can Interface with Investment Consultants to Access Institutional Capital (Part Two of Two)
,” Hedge Fund Law Report, Vol. 6, No. 28 (Jul. 18, 2013). Yet despite the Guidance Statement, many hedge fund managers are still struggling to understand and navigate the complexities of GIPS compliance. Against this backdrop, ACA Compliance Group recently hosted a webinar addressing GIPS compliance, focusing on issues specific to hedge fund managers, such as valuation, construction of GIPS composites, calculation of returns, side pocket reporting and benchmark selection. Managers that provide more clarity in their performance results may be able to court institutional investors more frequently and effectively. This article summarizes the main points from the webinar. For more on the GIPS standards, see “A Step-By-Step Guide to GIPS Compliance for Hedge Fund Managers
,” Hedge Fund Law Report, Vol. 4, No. 44 (Dec. 8, 2011).