Investor Reporting
Investor reporting tells clients how a fund performed and why. Learn what reports contain, GIPS standards, the key metrics and how to read a fund report critically.
Investors who hand money to a manager need to know how it is doing. Investor reporting is the regular communication of performance, positions, risk and outlook from a fund or manager to its clients. Good reporting is accurate, consistent and honest about losses as well as gains. Poor or misleading reporting has been a warning sign in many frauds and failures. Knowing what a good report contains also helps individual traders present, and judge, any track record.
What investor reports contain#
| Section | Content |
|---|---|
| Performance summary | Returns for the month, year to date, annualised since inception, against a benchmark |
| Risk statistics | Volatility, Sharpe ratio, maximum drawdown, beta. See Sharpe Ratio and Maximum Drawdown |
| Attribution | Where returns came from. See P&L and Performance Attribution |
| Exposures | Gross and net exposure, sector, country and factor breakdowns |
| Top positions | Largest holdings, sometimes with a delay |
| Commentary | What happened, what the manager did and the outlook |
| Fund terms | Fees, liquidity, assets under management |
| Disclosures | Methodology and risk warnings |
Reporting frequency#
| Fund type | Typical reporting |
|---|---|
| Mutual funds and ETFs | Daily NAV, monthly factsheets, semi annual and annual reports |
| Hedge funds | Monthly letters and estimates, quarterly letters, annual audited statements |
| Private equity | Quarterly reports with lagged valuations |
| Managed accounts | Statements from the custodian plus manager reports |
GIPS: a standard for honest performance#
The Global Investment Performance Standards (GIPS), maintained by the CFA Institute, set rules for calculating and presenting performance so investors can compare managers fairly.
| GIPS principle | Purpose |
|---|---|
| Time weighted returns | Remove the effect of client cash flows. See Measuring Returns and CAGR |
| Composites | Group all similar accounts, so managers cannot show only their best |
| Include terminated accounts | Prevents survivorship bias. See Survivorship and Selection Bias |
| Gross and net of fees disclosure | Shows the effect of fees |
| Consistent methodology | Results comparable over time |
Reading a fund report critically#
- Check net of fees returns and how fees are calculated.
- Compare with an appropriate benchmark. See Information Ratio and Tracking Error.
- Look at drawdowns and volatility, not just returns.
- Read the commentary for consistency: does the explanation match the exposures?
- Check who calculated the numbers: an independent administrator is a good sign. See Fund Accounting and NAV.
- Look for audited annual statements.
- Be wary of unusually smooth returns, which can signal illiquid assets, option selling or worse.
Regulation#
Regulators set rules on performance advertising. In the US, the SEC's Marketing Rule, which took effect in 2022, restricts how investment advisers present performance, including requirements to show net returns alongside gross returns and limits on hypothetical performance. See Trading Regulators: SEC, CFTC, FINRA and NFA.
Presenting your own record#
If you trade and want to show results, apply the same principles: report all accounts, net of costs, time weighted, with drawdowns and the full period, and keep broker statements as proof. See Record Keeping for Traders.
Frequently asked questions#
What is investor reporting?#
Regular communication from a fund or manager to clients about performance, risk, positions and outlook.
What are GIPS standards?#
Global Investment Performance Standards from the CFA Institute, which set rules for fair and comparable calculation and presentation of investment performance.
What should I look for in a fund report?#
Net of fees returns versus a benchmark, risk measures such as drawdown, attribution, exposures and evidence of independent calculation and audit.
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