ACA Performance Insight - May 2017

May 30, 2017


The May 2017 edition of Performance Insight covers the acquisition of Ashland Partners' GIPS® verification and investment performance practice, reporting performance using time-weighted returns and IRRS, the GIPS 20/20 Consultation Paper, and other industry hot topics.

ACA and Ashland: Why We’re Excited to be the Best GIPS Verification and Performance Team in the World 

Earlier this month, ACA announced that it is set to acquire Ashland Partners & Company, LLP's GIPS verification and performance practice. When this transaction closes in June, ACA Performance Services ("APS"), will offer the most experienced team of GIPS verifiers in the world, servicing over 1,000 clients annually, including 49% of the top 100 managers of institutional assets worldwide (as determined by Pensions & Investments magazine).

Why we're excited about this acquisition
Like ACA, Ashland's GIPS verification and performance team deeply values their client partnerships and is committed to providing their clients with exceptional service and industry expertise. Ashland also has invested significantly in technology to enhance the efficiency of verification testing procedures. By combining the top two GIPS verification firms in the world, APS will be able to leverage the deep industry expertise, cutting-edge technology resources, and best processes of both teams. We are pleased to provide our clients with a seamless transition during this integration. No team assignments on client engagements are changing as a result of this transaction. We are excited to offer enhanced services to our clients that will help them meet the demands of future growth and adoption of the GIPS Standards.

How will our clients benefit from this acquisition?
With this acquisition, the APS team will have over 90 professionals fully dedicated to performance services engagements. Our team will include 42 CIPM certificate holders and 10 CFA charterholders, which attests to our deep commitment to continuing education. In addition, this acquisition will allow us to invest more time and effort on servicing the growth we have observed in the non-GIPS assurance and focused performance reviews market globally. Upon completion of this acquisition and the joining of the APS and Ashland teams, our clients will have access to a best-in-class verification team, expanded asset class expertise, and timely verification testing.

The best team in the business
Combining ACA's and Ashland's teams will enable APS to offer our clients a greater depth of expertise across asset classes and jurisdictions around the globe, while continuing to provide the top-notch client service and proven processes they currently experience. We will also be positioned to meet the demands of a continuously expanding and increasingly complex industry. We look forward to joining forces with Ashland's GIPS verification and performance professionals and building the best team in the business.


Performance Reporting: IRR vs. TWR

The best methodology for calculating and presenting investment performance can be a tricky proposition. The choice will depend on the audience (prospect / current investor) and also what exactly the firm is trying to convey. In fact, we have seen a slight uptick in interest for showing multiple performance streams. Below, we will explore the two most popular methods for calculating and presenting performance and what they mean for both prospective and current clients. The time-weighted rate of return (“TWR”) and the internal rate of return (“IRR”) are both acceptable methods of performance calculation, but ultimately the most appropriate method of performance measurement depends on the investment strategy, structure, and the intended use of the information.

Time-weighted returns are generally accepted as the preferred method of calculation when the investor controls the timing of capital contributions and withdrawals. They are used in an attempt to make more direct apples-to-apples comparisons between investment managers, due to the removal of the impact of external cash inflows/outflows within the calculation. Traditionally, TWRs are measured on a monthly basis with cash flows being weighted according to the Modified Dietz formula. This formula removes the impact of cash flows through a weighting metric in the denominator. For more liquid asset classes, daily return calculations are becoming more commonplace as valuation information is likely available on a daily basis. Considering the TWR is measured point to point and not based on the entire life of an investment, return volatility across time is more easily measured. Any return period (say one year, for example) can be broken into smaller sub periods as long as valuation information is available (ex: a monthly basis). This allows for greater analysis of return profiles through return attribution and risk measurement. 

Click to read the full story.


GIPS 20/20 Consultation Paper

At the 20th Annual GIPS Standards Conference, back in October 2016, Carl Bacon, chair of the GIPS Executive Committee, and Jonathan Boersma, Executive Director, GIPS, at CFA Institute, provided some insight into the next edition of the GIPS standards, currently being referred to as GIPS 20/20.

There are several reasons why the GIPS standards need to change. Currently composites are the foundation of the GIPS standards, but composites are not appropriate for all investment products. Pooled funds also do not fit well in in the current composite-oriented framework. The next edition of the GIPS standards will be product driven rather than composite driven. This will allow firms that are product versus composite focused to apply the GIPS standards to the types of products they are managing versus trying to sift through the current GIPS standards to determine what is applicable for a particular product or fund. Conceptually, GIPS 20/20 will have 3 “pillars” of guidance;

  • One to one – composite performance is appropriate.
  • One to many – fund performance is appropriate.
  • One to none – for asset owners that have no prospective clients.

Each “pillar” will have its own set of comprehensive guidance.

Other goals for GIPS 20/20 include making the GIPS standards as simple as possible, removing unnecessary complexity and perceived barriers to compliance, and ensuring they are relevant for all asset classes and all types of managers. GIPS 20/20 will also be streamlined to incorporate requirements and recommendations found in guidance statements into the provisions of the GIPS standards.

The GIPS 20/20 Consultation Paper is out for public comment from 5/17/17-7/16/17 and can be found here. Comments can be sent to ( and the Exposure Draft is expected to be published in early 2018 for a 90-day comment period. 


Firm Notification Requirement - 2017 Form Now Available

Firms that claim compliance with the GIPS standards are required to notify CFA Institute of their claim of compliance. Each firm must submit the GIPS Compliance Form annually, by June 30th. Any data included in this form must be as of the prior December 31st. Firms completing the form currently must include data as of December 31, 2016. Note that the form can be submitted anytime between now and June 30th and is not dependent upon completion of a firm’s 2016 verification.

The 2017 form is now available and includes a few updates.

  • Ability to look up a previously submitted notification (need name and contact info used when last submitted)
  • create a login
  • on-the-fly editing

A link to the GIPS Compliance Form is here


Pooled Fund Guidance Statement Recap

The Guidance Statement on Broadly Distributed Pooled Funds was officially approved on March 13, 2017. The following are highlights of what is included, and what changed from the original drafting.

Click here for the complete article.


Upcoming Events

21st Annual GIPS Standards Conference
September 14-15, 2017
Sheraton San Diego Hotel & Marina
San Diego, CA

ACA Fall Compliance Conference
October 25-27, 2017
Rancho Bernardo Inn
San Diego, CA


Complimentary Webcasts

Upcoming webcast

The Future of the GIPS Standards

Tuesday, June 6, 2017, 11:00a.m.-12:00p.m. EST


Jonathan Boersma, CFA, Head, Professional Standards, Executive Director, Global Investment Performance Standards, CFA Institute
Alicia Hyde, CIPM, Partner, ACA Performance Services

Jonathan Boersma, Executive Director, Global Investment Performance Standards at CFA Institute, along with Alicia Hyde, Partner of ACA Performance Services, will discuss current initiatives at CFA Institute including forthcoming guidance, adoption rates, and the future of the GIPS standards. In particular, Jonathan will focus on:

  • global trends and adoption of the GIPS Standards;
  • profile of the firms that have registered with CFA Institute;
  • asset owner up-take;
  • forthcoming guidance statements;
  • GIPS 2020; and
  • other priorities

To register, click here

Replays available

Click here to view all ACA webcasts.