Investment Management
OCTOBER 2003
AIMR Issues Guidance Statement on the Use of
Supplemental Performance Information
by Michael S. Caccese and Erica Blake*
The Association for Investment Management and
Research (“AIMR”) recently issued guidance to
investment firms that claim compliance with the
AIMR Performance Presentation Standards (“AIMRPPS” or “Standards”) on the use of supplemental
information (“Supplemental Information”) when
presenting investment performance (“Guidance
Statement”).1 The Guidance Statement defines and
addresses the proper use of Supplemental
Information. The Guidance Statement does not
restrict firms from providing any specific information
requested by prospective clients or their agents.
WHAT IS SUPPLEMENTAL INFORMATION
Supplemental Information is defined as any
performance-related information included as part of
an investment firm’s AIMR-PPS compliant
presentation that supplements or enhances the
required and/or recommended disclosure and
presentation provisions of the Standards.
Supplemental Information helps the recipient of an
AIMR-PPS compliant presentation better understand
the performance results presented.
WHAT IS NOT SUPPLEMENTAL INFORMATION
The Guidance Statement focuses on what is not
Supplemental Information under the Standards.
AIMR establishes three categories of performance-
related information that are not Supplemental
Information:
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Additional Information. Additional
information that is “required” or
“recommended” under the Standards is not
“Supplemental Information.” These include:
(i) graphs and charts presenting AIMR-PPS
required or recommended information; (ii)
composite returns for quarterly and/or shorter
time periods; (iii) annualized composite
returns; (iv) composite-level country and sector
weightings.
n
Non-Performance Related Information.
Non-Performance Related Information includes
general information regarding the firm, a
description of an investment strategy, or details
about the investment process.
n
Misleading Information. Any performancerelated information “that may mislead or
deceive” is not Supplemental Information.
AIMR listed two performance presentations
that are misleading under the Standards thereby
prohibiting an investment firm claiming AIMRPPS compliance from ever presenting
performance in this manner, unless specifically
requested by a prospective or current client and
presented in a one-on-one presentation:
* Michael Caccese is a partner in the Boston office of Kirkpatrick & Lockhart LLP. He works extensively with investment firms on
compliance issues, including all of the AIMR standards. He was previously the General Counsel to AIMR and was responsible for
overseeing the development of the AIMR-PPS, GIPS and other standards governing the investment management profession and
investment firms. He can be reached at 617.261.3133 and mcaccese@kl.com. Erica Blake is an associate with K&L in the Boston
office and may be reached at 617.261.3244 and eblake@kl.com.
1
While the Guidance Statement refers to the Global Investment Performance Standards (GIPS), all interpretations issued by AIMR
related to GIPS are applicable to AIMR-PPS.
Kirkpatrick & Lockhart LLP
(i)
model, hypothetical, backtested, or
simulated results linked to actual
performance results; and
(ii) non-portable performance from a prior
firm linked to current ongoing
performance results.
GUIDING PRINCIPLES WHEN PRESENTING
SUPPLEMENTAL INFORMATION
In addition to the above, AIMR sets five
requirements to be followed when presenting
Supplemental Information: (1) Supplemental
Information must satisfy the spirit and principles of
the Standards, i.e., fair representation and full
disclosure; (2) Supplemental Information must not
contradict or conflict with the information provided
in the AIMR-PPS compliant presentation; (3)
Supplemental Information must relate directly to the
compliant presentation; (4) Supplemental
Information must be clearly labeled and identified as
supplemental to a particular composite presentation;
and (5) the presentation of Supplemental Information
must be accompanied or preceded by a fully
compliant AIMR-PPS presentation.
EXAMPLES OF SUPPLEMENTAL INFORMATION
Examples of Supplemental Information include:
n
Carve out returns that exclude cash
n
Non-portable investment returns
n
Model, hypothetical, backtested, or simulated
returns
n
Representative account information, such as:
n
n
Composite or portfolio-level specific holdings
n
Peer group comparisons
n
Risk-adjusted performance.
Information that is “required” or “recommended” by
the Standards and is included in a presentation is not
considered Supplemental Information and therefore
does not have to be labeled as such.
LOCATION OF SUPPLEMENTAL INFORMATION
Supplemental Information must be clearly labeled
and identified as “supplemental” to a particular
composite presentation. The presentation and
location of Supplemental Information in relation to
the AIMR-PPS required or recommended
information depend on the type of Supplemental
Information and its potential to mislead.
Supplemental Information can be presented on the
same page as AIMR-PPS required or recommended
information as long as it does not mislead, contradict
or conflict with the required AIMR-PPS compliant
information, is clearly labeled as Supplemental
Information, and references the appropriate
composite presentation that it supplements. This
may be accomplished by:
(i) placing Supplemental Information on the same
or back of the page as the AIMR-PPS
compliant information – if appropriate; and
(ii) including a statement indicating that the
Supplemental Information complements the
XYZ Composite presentation and cites its
location in the presentation.
n
Portfolio-level country weightings
CONCLUSION
n
Portfolio-level sector weightings
n
Portfolio-level risk measures
The Guidance Statement can be found on AIMR’s
website at www.aimr.org/standards. The effective
date of the Guidance Statement is January 1, 2004
and earlier compliance is encouraged.
Attribution analysis
Kirkpatrick & Lockhart LLP
2
Kirkpatrick & Lockhart LLP maintains one of the leading investment management practices in the United States,
with more than 60 lawyers devoting all or a substantial portion of their practice to this area and its related
specialties. The American Lawyer Corporate Scorecard, published in April 2003, lists K&L as a primary legal
counsel to the investment companies, board members or advisory firms for 15 of the 25 largest mutual fund
complexes. No law firm was mentioned more frequently in the Scorecard.
We represent mutual funds, closed-end funds, insurance companies, broker-dealers, investment advisers, retirement
plans, banks and trust companies, hedge funds, offshore funds and other financial institutions. We also regularly
represent mutual fund distributors, independent directors of investment companies and service providers to the
investment management industry. In addition, we frequently serve as outside counsel to industry associations on a
variety of projects, including legislative and policy matters.
We work with clients in connection with the full range of investment company industry products and activities,
including all types of open-end and closed-end investment companies, funds of hedge funds, variable insurance
products, private and offshore investment funds and unit investment trusts. Our practice involves all aspects of the
investment company business.
We invite you to contact one of the members of the practice, listed below, for additional assistance. You may also
visit our website at www.kl.com for more information, or send general inquiries via email to
investmentmanagement@kl.com.
BOSTON
Michael S. Caccese
Philip J. Fina
Mark P. Goshko
Thomas Hickey III
Nicholas S. Hodge
617.261.3133
617.261.3156
617.261.3163
617.261.3208
617.261.3210
mcaccese@kl.com
pfina@kl.com
mgoshko@kl.com
thickey@kl.com
nhodge@kl.com
LOS ANGELES
William P. Wade
310.552.5071
wwade@kl.com
NEW YORK
Philip L. Kirstein
Beth R. Kramer
Richard D. Marshall
Robert M. McLaughlin
Loren Schechter
212.536.4831
212.536.4024
212.536.3941
212.536.3924
212.536.4008
pkirstein@kl.com
bkramer@kl.com
rmarshall@kl.com
rmclaughlin@kl.com
lschechter@kl.com
SAN FRANCISCO
Eilleen M. Clavere
Jonathan D. Joseph
David Mishel
Mark D. Perlow
Richard M. Phillips
415.249.1047
415.249.1012
415.249.1015
415.249.1070
415.249.1010
eclavere@kl.com
jjoseph@kl.com
dmishel@kl.com
mperlow@kl.com
rphillips@kl.com
WASHINGTON
Clifford J. Alexander
Diane E. Ambler
Catherine S. Bardsley
Arthur J. Brown
Arthur C. Delibert
Robert C. Hacker
Benjamin J. Haskin
Kathy Kresch Ingber
Rebecca H. Laird
Thomas M. Leahey
Cary J. Meer
R. Charles Miller
Dean E. Miller
R. Darrell Mounts
C. Dirk Peterson
David Pickle
Alan C. Porter
Theodore L. Press
Robert H. Rosenblum
William A. Schmidt
Lynn A. Schweinfurth
Donald W. Smith
Robert A. Wittie
Robert J. Zutz
202.778.9068
202.778.9886
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202.778.9042
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kingber@kl.com
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This publication/newsletter is for informational purposes and does not contain or convey legal advice. The information herein
should not be used or relied upon in regard to any particular facts or circumstances without first consulting a lawyer.
© 2003 KIRKPATRICK & LOCKHART LLP.
ALL RIGHTS RESERVED.