The GIPS Executive Committee has just released three revised guidance statements–on real estate, private equity and verification–and is seeking comment on the proposed revisions, which are expected to go into effect on January 1, 2011.
The Global Investment Performance Standards are voluntary ethical norms for the calculation and presentation of investment performance to potential investors. The current versions of the guidance statements on real estate, private equity and verification became effective January 1, 2006. The GIPS Executive Committee, in collaboration with various technical subcommittees– including the Verification/Practitioner Subcommittee, the GIPS Real Estate Working Group and the GIPS Private Equity Working Group–has revised the three guidance statements to reflect the 2010 edition of the GIPS standards, released on January 17, 2010, and to improve existing guidance on the verification requirements and recommendations.
Some of the significant revisions of the Guidance Statement on Real Estate, other than changes made to conform to the 2010 edition of the GIPS standards:
? Enhanced guidance on discretion as it relates to real estate portfolios has been added to the guidance statement.
? Clarification of the composite construction section of the document. Guidance has been added to the Guidance Statement describing investment-level and property-level performance. In addition, composite construction for closed-end real estate funds is addressed and a separate section has been added specifically for determining the non-GIPS-compliant performance period for real estate closed-end fund composites.
? A new section of the guidance statement on fees and expenses has been included.
? A new section has been added addressing when new real estate portfolios are to be included in a composite.
The GIPS Executive Committee asked respondents to the Guidance Statement on Private Equity to comment on these questions:
? Are the descriptions of the industry and vehicles clear enough to distinguish private equity from other asset classes? Is it clear in which instances the private equity provisions apply?
? The private equity provisions can be applied to special cases of evergreen funds of funds. Do you agree with the characteristics? Is it clear how firms would comply with these provisions?