| GIPS (Global Investment Performance Standards) | A set of standardized, industry-wide ethical principles for calculating and presenting investment performance; administered by CFA Institute |
| Composite | An aggregation of one or more portfolios managed according to a similar investment mandate, objective, or strategy |
| Time-weighted return (TWR) | A return measure that eliminates the effect of external cash flows; reflects the manager’s investment skill; the default method under GIPS |
| Money-weighted return (MWR) | A return measure equivalent to the internal rate of return (IRR); accounts for timing and size of cash flows; required by GIPS for private equity and real estate |
| Independent verification | A voluntary review by an independent third party to confirm that a firm’s GIPS-compliant processes are properly designed and implemented; applies to the entire firm, not individual composites |
| Discretionary portfolio | A portfolio where the firm has the ability to fully implement its intended investment strategy without significant client-imposed restrictions; must be included in composites |
| Non-discretionary portfolio | A portfolio where client-imposed restrictions prevent the firm from fully implementing its strategy; excluded from composites |
| Definition of the firm | The entity held out to clients as a distinct business unit; must be consistently applied and include all discretionary and non-discretionary assets in total firm assets |
| Survivorship bias | Distortion in performance results caused by excluding terminated (often poor-performing) accounts from the record; GIPS prevents this by requiring inclusion of terminated accounts |
| Representative account | A single account selected to represent a composite or strategy; GIPS discourages this practice in favor of reporting full composite performance |
| Fundamentals of compliance | GIPS requirements for firm-wide compliance, documentation of policies, minimum 5-year history (building to 10 years), accurate data, and no misleading performance |
| GIPS Handbook | The comprehensive reference document that provides guidance, interpretations, and implementation advice for the GIPS standards |
| Fair value | The price that would be received to sell an asset in an orderly transaction; GIPS requires fair value for portfolio holdings |
| Compliant presentation | A GIPS-formatted performance report meeting all required disclosures, calculation methods, and presentation standards |
| Firm-wide compliance | The GIPS requirement that compliance must cover the entire firm — partial compliance or compliance at the composite level alone is not permitted |