“Opening the Black Box” is our ongoing series on the data treatments, assumptions, and methodologies behind our analyses. In this series, we answer frequently asked questions on how we build, validate, and make decisions about our data.
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In 2022, CEM recognized a gap in the industry – there was no global standard for how institutional investors should report their investment and administration cost and performance. This meant that institutions that considered each other peers but operated in different geographies or worked with different investment managers found comparability challenging. To fill that gap, CEM published the Global Reporting Principles, known as the GRP and pronounced “grip.”
How the principles were developed
Developing the GRP was a collaborative effort from the start. CEM worked with an Advisory Board of seven leading global institutional investors from the public and corporate sectors, representing five countries. Their involvement ensured the principles were grounded in the realities of how institutional investors operate across different markets and regulatory environments.
CEM also consulted the major regional reporting standards in the principal pension markets. These included CIPFA and the Cost Transparency Initiative in the United Kingdom, the Dutch Pension Federation’s guidance in the Netherlands, EIOPA in Europe, and Regulatory Guide 97 in Australia. For private markets investment cost reporting, CEM considered the ILPA template and INREV’s guidance. Global performance reporting and accounting standards, including GIPS and IFRS 9, were also part of the review.
What the principles are designed to achieve
The GRP has three core objectives. The first is to improve the quality and timeliness of reporting, particularly from external managers. The second is to enable better peer-to-peer comparisons on a global basis. The third is to provide a universal industry standard that regional regulators can use as a reference point for advancing transparency in their own markets.
The principles cover both investment and pension administration reporting. They include guidance on the transparency of investment and administration costs, consistency and accuracy in investment performance reporting, and disclosure of key member service metrics. They also set expectations around the timeliness of disclosures.
As one example, the principles specify that costs should be reported before any offsets that reduce returns. The complete set of the 16 principles can be found here.
The Data Scorecard
Based on the GRP, CEM developed a scorecard to assess how closely each dataset adheres to the principles. The scoring methodology differs between investments datasets and pension administration datasets. But the assessment is similar. The scorecard measures the completeness of investment and administration cost and performance reporting, as well as the timeliness of data submitted to CEM.
All CEM subscribers are now scored against the GRP-based rubric and datasets are awarded gold, silver and bronze rating. Datasets that don’t meet CEM’s quality thresholds are excluded from the database.
The scoring is designed to become more demanding over time. For instance, the timeliness threshold will become more stringent in future cycles to drive earlier reporting. Similarly, the criteria for reporting private market fees will become more rigorous, with the goal of pushing external managers toward more transparent and timely disclosure practices.
CEM helps you identify areas where you score low and share best practices in behaviours across subscribers .If you have not yet received your data scorecard and would like to see it, please reach out to your CEM relationship manager or contact us at production@explorecem.com.
Our committment to you
The trust our subscribers have placed in us over the years, many for close to a decade without interruption, is something we take seriously. This series is one way of honouring that trust. We are not here to simply explain ourselves. We are here to open a dialogue that pushes our work, and the industry, forward.
We look forward to hearing from you. If there is a question you would like us to address, please reach out to us at insights@explorecem.com.
This blog is part of our “Opening the Black Box” series. If you’d like to receive new posts in your inbox, please click here to subscribe.