To make sure your firm is ready for GIPS ®, please read Amy Jones’ full paper “Are Your Firm’s GIPS® Materials Current?“
The use of preliminary results is not prohibited by the Global Investment Performance Standards (GIPS®) standards. The GIPS® Guidance Statement on Alternative Investment Strategies and Structures actually addresses this issue by contrasting estimated versus final valuations. The guidance statement entertains the idea that estimated (i.e., preliminary) values may be used, but if final values are materially different and a subsequent revision is necessary, the firm’s error correction policy must be considered.
As far as how to construct and present the preliminary composite, don’t exclude any accounts because they have not been finalized. Instead, the composite should consist of all accounts that satisfy the composite definition, using the best information available at the time. Excluding accounts—even those subject to change—would introduce much higher potential for a material revision to be necessary later.
However you approach this, if you are going to present preliminary information, the firm’s process related to this—including how potential revisions will be handled once final results are available—should be documented internally. Any preliminary results that are distributed should also be properly labeled as such.
Guest blogger Amy Jones, CIPM, is the founder and principal at Guardian Performance Solutions LLC, a specialty compliance consulting firm dedicated to help investment advisory firms to implement, maintain and manage compliance with the Global Investment Performance Standards® (GIPS®), and review performance advertising materials for adherence with SEC requirements. Mrs. Jones is a recipient of the Certificate in Investment Performance Measurement (CIPM), a credential awarded by CFA Institute that focuses on performance evaluation and the GIPS standards.