Overview of GIPS
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Why were GIPS Standards created?
In the past it was difficult to meaningfully compare the investment performance data as people followed different reporting procedures and practices.
Some of the misleading practices included:
- Representative accounts: The firms will take the top performing portfolios and use it as a representative of the overall investment results of the firm.
- Survivorship bias: Unsuccessful portfolios are removed, and the firm's average performance is adjusted to remove the data of the dropped portfolios. This helps them portray better performance.
- Varying Time Periods: The firm presents the performance for a selected period during which they produced above-average returns.
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