Investment managers are entering 2025 facing a more demanding compliance environment, shaped by heightened regulatory scrutiny and rising expectations from institutional clients.
According to ACA Group, maintaining alignment with the Global Investment Performance Standards (GIPS) has become less about static rule-following and more about demonstrating consistency, transparency and governance across performance reporting.
New research from ACA, based on data gathered from 785 verified firms, provides a detailed snapshot of how the industry is adapting its GIPS policies and practices to meet these pressures.
One of the most notable shifts highlighted by the data is the growing reliance on model fees rather than actual fees when calculating net composite returns. This trend has accelerated following the introduction of the SEC’s marketing rule, which has pushed firms to standardise their performance presentations. Among larger investment managers, 60% now use model fees, a significant increase from 44% in 2021. While model fees offer operational simplicity and consistency across composites, firms must ensure that disclosures are robust and clear to avoid creating a misleading impression for prospective clients.
Composite minimums are another area where practices are diverging by firm size. Just over half of all firms surveyed continue to apply composite minimums, but larger organisations are increasingly moving away from them. For these firms, the impact of smaller accounts on overall composite performance is often negligible, reducing the practical value of maintaining strict minimum thresholds. This shift reflects a broader trend towards simplifying composite construction while maintaining the integrity of reported results.
Operational complexity is also influencing the decline in the use of significant cash flow policies. Only 30% of firms now apply such policies, down markedly from previous years. Implementing significant cash flow rules consistently can be resource-intensive, particularly for firms managing large volumes of accounts or operating across multiple strategies. As a result, many managers are reassessing whether the compliance benefit justifies the operational burden.
Advances in technology are playing a clear role in improving valuation practices. Around 60% of firms now revalue portfolios on a daily basis, supporting more accurate and timely performance reporting. Daily valuation has become increasingly achievable as portfolio management systems and data infrastructure mature, and it is now viewed as an important enabler of precise GIPS-compliant reporting rather than an aspirational best practice.
Overlaying these operational trends is the continued impact of the SEC’s marketing rule. Firms must ensure that any presentation of gross-of-fee returns is accompanied by net-of-fee figures, even in one-to-one discussions with prospects. This requirement has prompted widespread reviews of existing composites and performance methodologies, with many firms turning to model fees as a way to ensure consistency and compliance across all marketing materials.
Taken together, the findings underline why benchmarking against peers has become an essential part of performance governance. Understanding where a firm’s practices sit relative to industry norms can help reduce compliance risk, identify opportunities to streamline operations and strengthen transparency with both regulators and clients. In an environment where performance reporting is under closer scrutiny than ever, GIPS compliance is increasingly a strategic priority rather than a purely technical exercise.
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