Pension Funds and Performance Standards

David Spaulding, founder of the eponymous Spaulding Group, provokes readers with his suggestion that pension plans become "GIPS" compliant. Said differently, his thought is that users of information provided about retirement plan financial health would benefit if reported numbers reflect the Global Investment Performance Standards. Just an aside, www.gipsstandards.org states that "The GIPS standards are voluntary and are based on the fundamental principles of full disclosure and fair representation of investment performance results."

I have long maintained the need for more uniformity and clarity about how pension plan numbers are shared with the outside world. Absent fraud, there can be a huge discrepancy between what someone reads on the printed page and the true economic risks associated with any given scheme. Take a look at "The Plan That Didn't Bark: To solve the mystery of benefit plans, analysts must learn to think like detectives" by Susan Mangiero, CFA Magazine, March-April 2008.

I applaud Dave for reminding his blog readers that the standards exist "to provide an ethical framework for asset managers to provide their past performance to prospective clients." He adds that pension funds that expend time and money on a "GIPS" effort stand to "get their shop in order" by being forced to establish policies, procedures and controls. However, he adds that plan sponsors will still need to document how they are doing so I am a bit unclear as to the role of GIPS for pension plans and have asked Mr. Spaulding for further clarification about his ideas.In the meantime, click to read "Pension funds and GIPS" at Investment Performance Guy, April 20, 2011.