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GIPS standards & CIPM designation


Investment Performance Measurement and the Investment Industry.

By Justin Taheri, CFA, CIPM

(This article was published in the Analyst magazine of the Toronto CFA Society Fall 2009)

There was a time, not long ago, that rogue elements in marketing departments would come up with all the performance results one could ask for. The Global Investment Performance Standards (GIPS) was a first step in reclaiming the credibility that the investment industry had lost due to the actions of a few. The GIPS standards benefited the investment management industry worldwide by providing assurances to the client community that the historical track records of the presenters are reliable, abide by a set of standards and that all competing presentations are comparable.

Given the scope of the GIPS, firms had to invest in new technology and hire personals that were expert in the field. But until lately, there was no formal education for the practitioners to go through, nor were there any tests to assess their understanding of the knowledge required for the task at hand.

In October 2005, the CFA Institute introduced the first formal course for practitioners in the investment performance measurement field and called it “Certificate in Global Investment Performance Standards” (CGIPS). Effective November 1, 2006, the program was renamed “Certificate in Investment Performance Measurement” (CIPM) to better reflect the scope of the program and the knowledge base it offered. By December 2006 the first group of 98 pioneers were granted the new designation. CIPM was born.

I have been working in a performance measurement role for a few years when I heard of the formal training, and am glad that I was able to be part of the first group of people to be granted this privilege to carry the title. But having another abbreviation added to your name, as pleasing as it is, carries with it the added responsibility of constantly being aware of how you add value to your organisation on a daily basis.

How has CIPM affected my career? After going through the program, I feel secure in having the knowledge needed to be the best at what I do. Before going through the program, I always had to deal with the objections of people who were not “happy” about the results presented. With the structured knowledge that the program has provided me, I have had the expertise and poise to carry my course of action and be confident that I am doing the right thing. In this era of constant turbulence in the markets, it is more important than ever to carry out my fiduciary duties by knowing how my ultimate clients’ money is being invested.

Canadian investment firms should be proud that Canada already has 34 professionals who can use the CIPM designation, roughly 8 percent of the total CIPM Charterholders around the world, and that there are another 38 who have been writing the exam as of the latest window in April 2009. Availability of this pool of knowledge provides Canadian firms with a comparative advantage to be the best internationally.

As a CIPM charterholder, I must abide by a Code of Ethics that is as though as CFA charter’s Code of Ethics and Standards of Professional Conduct. Encouraging my (specially non-CFA) performance measurement personal to pursue the CIPM designation will enhance the knowledge base and ethical standing of my group. Additionally, mandatory continuing education requirements of the program ensures constant upgrading for this ever-evolving profession. I am required to complete 45 hours of continuing education over three years to stay in good standing with the program. This has helped me become more involved with continuing education opportunities and keep my knowledge base up to date. Moreover, I can use my continuing education credits for my CFA voluntary continuing education program.

I have been asked how different is the new program from the CFA charter. The main difference is that the CFA charter is a generalist program for investment professionals, while the CIPM is a specialist program for investment performance measurement professionals. Also, CFA is focused on decision-making process whereas CIPM is focused on performance evaluation and presentation. As a result, CFA charterholder looks at ex-ante perspective (before the fact) while CIPM charterholder is concerned with ex-post perspective (after the fact).

For performance measurement professionals, confidence, knowledge and expertise are the attributes that they will gain from the program; the confidence to know the body of knowledge and expertise to be able to handle ever-changing clients’ requirements.

For organizations, given that the program is designed and constantly evolved with the most up to date knowledge base, and given that clients equate CFA institute with higher standards of professional conduct, they will benefit to have CIPM Charterholders responsible for calculating and disseminating their performance results. Just as constant system upgrading and claim of compliance are necessities these days to compete internationally, having CIPM Charterholders on staff gives organizations another advantage in competing for new business.