AIMR-PPS Standards Become Global Jan. 1

Published July 27, 2001, 1:00 a.m. EDT

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AIMR Pushing Managers to Adopt Revised Standards Before Deadline

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AIMR has jumped on the global bandwagon by approving modifications to the AIMR Performance Presentation Standards, ( AIMR-PPS), making industry standards for calculating and reporting investment returns in the U.S. and Canada more consistent with comparable global standards.

The redrafted standards will replace the existing AIMR-PPS standards on Jan. 1, 2002. Firms claiming compliance must reflect the changes in their investment reporting by December 31, 2001 in order to remain in compliance, but AIMR is encouraging investment managers to adopt the revised standards sooner, if possible.

The modifications will affect investment managers, consultants, auditors and software distributors in the U.S. and Canada who use the AIMR-PPS standards as the accepted industry standard for calculating and reporting investment performance -- in much the same way that corporations use GAAP as the common standard for reporting financial performance. The changes will make it possible for investment managers to 'transport' reports on their past investment results to many other countries without having to recalculate the numbers using different rules and allow investment managers in other countries to report their investment results in the U.S. and Canada using the Global Investment Performance Standard (GIPS) without having to recalculate the numbers to different North American rules.

Most of the changes affect how performance is presented to investors more than how the numbers are calculated. The most publicly visible change is the addition of new advertising guidelines allowing firms for the first time to state in their advertisements that they are AIMR-PPS compliant without having to back that claim up with a full presentation of their AIMR-PPS calculations in the ad, as previous standards required. One of the most significant changes concerns procedures for verifying a firm's compliance.

The standards previously allowed two levels of verification: Firm-wide ('Level I') and composite-specific ('Level II'). In order to encourage and emphasize firm-wide verification and provide clear, practical procedures for verifiers, the redrafted AIMR-PPS standards now incorporate verbatim the GIPS verification language, which has no 'Level II verification.'

Firms will still be able to conduct performance-examination audits of composite results, but, following a 12-month phase-out period, this will no longer be considered a formal AIMR-PPS verification exercise as of January 1, 2003. The redrafted AIMR-PPS standards and a comparison table of the changes can be viewed at http://www.aimr.org/standards/pps/.