Money managers planning to use a Global Investment Performance Standards passport might find they also will need a "visa" in certain countries.
Specifically, additional requirements in the United Kingdom, Germany and Switzerland might add to managers' costs and in some cases might hurt their chances of winning business.
The GIPS guidelines have found wide international acceptance since their publication last year as a way for pension fund trustees to compare money managers' performance. But some countries have their own performance presentation standards and local performance watchdogs believe the GIPS does not go far enough.
In Great Britain, the National Association of Pension Funds, London, is circulating a draft list of local requirements in addition to the GIPS, said David Gould, the NAPF's investment services manager.
The draft that will be discussed next month by members of the NAPF's GIPS committee includes a controversial proposal for mandatory external verification of firms' compliance with the standards.
The GIPS do not require money manager performance data to be verified by a third party, such as performance measurers The WM Co., Edinburgh, Scotland, in order to be compliant.
There is concern that this requirement for external verification will be an unnecessary cost. But Mr. Gould hopes new performance verification service providers such as HSBC Global Fund Services Ltd., Edinburgh, will increase competition in the market and ultimately reduce costs.
"We think the process of verification by an outside party is fundamental to the implementation of these standards. We are not in the game of loading costs on companies in order for them to compete, but we don't want to give up something that the U.K. has had," he said.
Swiss investment officials also are considering making external verification mandatory for GIPS compliance, said Hans Joerg von Euw, head of marketing and client services for Julius Baer Asset Management Ltd., Zurich, and president of the committee for the Swiss Performance Presentation Standards.
Also, beginning in January, the Swiss will require managers to provide performance figures for at least 10 years and provide a measurement of the risk in both the benchmark and composite funds. GIPS require firms to post a minimum of five years of performance figures.
Swiss officials expect to publish details later this year on how the risk should be measured, but it is likely that alpha or Sharpe figures will have to be provided for equity funds. Disclosure of relevant risk measures is only a recommendation in the GIPS.
"These standards are here to allow the client to ask the right questions," Mr. von Euw said.
German investment industry officials plan to require managers to provide monthly reporting standards -- tougher than the GIPS' quarterly performance figures, said David Mark, director of The World Markets Co. GmbH in Frankfurt.
Money managers competing in Germany also will be required to state realized and unrealized losses as well as gains in calculating the total return. The GIPS do not specifically mention the inclusion of unrealized losses, but German authorities were keen to specify exactly what was required, Mr. Mark said.
The methodology used to calculate performance and valuation also will have to be disclosed; this is only a recommendation in the GIPS. The German requirements also specify the presentation period as a calendar year; the GIPS do not specify a time period.
While some of these requirements might seem like "hair-splitting," the intention is to make comparisons easier between asset managers, Mr. Mark said.
But the question on consultants' and asset managers' lips is whether non-compliance with local standards is likely to exclude investment firms from bidding for local mandates.
Asset managers that don't comply with the GIPS could be excluded from the selection process for pension fund mandates, said Brian Henderson, WM Co. executive director.
But Carl Bacon, director of risk control and performance measurement for Foreign & Colonial Management Ltd., London, does not believe the differences at the national levels are significant. Compliance with these national idiosyncrasies would be a "minor step" for a firm that already meets the standards, he said.
A money manager for a large German investment bank said domestic requirements in addition to GIPS are unnecessary but added fund managers grudgingly will comply with them "because they have to."