Standard III(D) Performance Presentation
Updated April 2024
CFA Institute
The Standard
When communicating investment performance information, members and candidates must make reasonable efforts to ensure that it is fair, accurate, and complete.
Guidance
Standard III(D) requires members and candidates to provide credible performance information to clients and prospective clients and to avoid misstating performance or misleading clients and prospective clients about the investment performance of members or candidates or their firms. This standard encourages full disclosure of investment performance data to clients and prospective clients.
Standard III(D) covers any practice that would lead to misrepresentation of a member’s or candidate’s performance record, whether the practice involves performance presentation or performance measurement. This standard prohibits misrepresentations of past performance or expected performance. A member or candidate must give a fair and complete presentation of performance information whenever communicating data with respect to the performance history of individual accounts, composites, or groups of accounts.
The requirements of this standard are not limited to members and candidates managing separate accounts. Whenever a member or candidate provides performance information for which the manager is claiming responsibility, such as for pooled funds, the history must be accurate. Research analysts promoting the success or accuracy of their recommendations must ensure that their claims are fair, accurate, and complete.
If the presentation is brief, the member or candidate must make available to clients and prospects, on request, the detailed information supporting that communication. Best practice dictates that brief presentations include a reference to the limited nature of the information provided.
Compliance Practices
Compliance with the GIPS® Standards
For members and candidates who are showing the performance history of the assets they manage, compliance with the GIPS standards is the best method to meet their obligations under Standard III(D). Members and candidates should encourage their firms to comply with the GIPS standards. Members and candidates whose firms do not comply with the GIPS standards can meet their obligations under Standard III(D) to present fair, accurate, and complete investment performance history by, among other things,
- considering the knowledge and sophistication of the audience to whom a performance presentation is addressed when determining what information to provide and tailoring it accordingly,
- presenting the performance of a composite of similar portfolios rather than using a single representative account,
- including terminated accounts as part of any composite performance history,
- including disclosures that fully explain the performance results being reported (for example, stating, when appropriate, that results are simulated when model results are used; clearly indicating when the performance record is that of a prior entity; or disclosing whether the performance is gross of fees, net of fees, or after tax), and
- maintaining the data and records used to calculate the performance being presented.
Application of the Standard
- Example 1 (Performance Calculation and Length of Time)
- Example 2 (Performance Calculation and Asset Weighting)
- Example 3 (Performance Presentation and Prior Fund/Employer)
- Example 4 (Performance Presentation and Simulated Results)
- Example 5 (Performance Calculation and Selected Accounts Only)
- Example 6 (Performance Attribution Changes)
- Example 7 (Performance Calculation Methodology Disclosure)
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