On May 18, 2012, the CFA Institute’s GIPS Executive Committee, governing body for the Global Investment Performance Standards (“GIPS”® or “GIPS Standards”), formally adopted the “Guidance Statement on Alternative Investment Strategies and Structures” (the “Guidance Statement”), which becomes effective on October 1, 2012. The Guidance Statement is primarily intended to address difficulties that arise in applying the GIPS Standards to non-traditional asset classes; however, firms that claim compliance with the GIPS Standards must comply with the new guidance for all of the firm’s composites regardless of the asset classes the firm manages.

The Guidance Statement includes guidance on the following topics:

- Firm definition;

- Composite construction;

- Input data;

- Valuation (methodology, frequency and estimated valuation);

- Performance calculation (fees and expenses for fund of funds and master-feeder structures);

- Side pockets (composite construction and performance); and

- Disclosure (risks and benchmarks).

This alert summarizes the key, high-level guidance principles contained in the Guidance Statement.