What qualifies as supplemental information under GIPS, and how must it be labeled and presented?

Supplemental information under GIPS is any performance-related data included in a GIPS-compliant presentation that goes beyond the minimum requirements and recommendations of the standards. It must be clearly labeled, must not contradict or misrepresent the required information, and must not be given greater prominence than the compliant data.\n\nWhat Qualifies as Supplemental:\n\n- Individual portfolio returns within a composite\n- Non-required risk measures (Value at Risk, drawdown statistics)\n- Attribution analysis or factor exposures\n- Performance of non-fee-paying portfolios\n- Ported performance from a prior firm (during the transitional period)\n- Benchmark comparisons beyond the required primary benchmark\n- Hypothetical or model portfolio performance\n\nPresentation Requirements:\n\n| Rule | Requirement |\n|---|---|\n| Labeling | Must be clearly identified as \"Supplemental Information\" |\n| Placement | Cannot be more prominent than required GIPS data |\n| Consistency | Must not contradict required composite returns |\n| Methodology | Must disclose how supplemental data was calculated |\n| Context | Must provide enough context to prevent misinterpretation |\n\nWorked Scenario:\n\nMarketing director Bridget at Falconer Capital prepares the annual GIPS-compliant presentation for the Mid Cap Value composite.\n\nRequired GIPS presentation includes:\n- Annual composite returns for 10 years (or since inception)\n- Benchmark returns\n- Number of portfolios and composite assets\n- Dispersion measure (if 6+ portfolios)\n- Three-year annualized standard deviation\n\nBridget wants to add:\n1. Returns for the top-performing portfolio in the composite\n2. Maximum drawdown analysis\n3. Sharpe ratio comparison\n4. A model backtest showing how the strategy would have performed in 2008\n\nCompliance Assessment:\n\n1. Top portfolio return: Permitted as supplemental, but must be labeled \"Supplemental Information\" and must also show the composite return prominently. Showing only the best portfolio without the composite would be misleading.\n\n2. Maximum drawdown: Permitted as supplemental. Must label and disclose calculation methodology (peak-to-trough using monthly or daily returns).\n\n3. Sharpe ratio: Permitted as supplemental. Must disclose the risk-free rate used and the calculation period.\n\n4. Model backtest: This is more restrictive. Hypothetical/backtested performance carries significant risk of misleading investors. If included, it must be prominently labeled as supplemental, clearly described as hypothetical, and accompanied by disclosures about the limitations of backtested data (no actual trading, hindsight bias, transaction costs assumptions).\n\nWhat Is NOT Permitted:\n- Presenting supplemental data in a larger font or more prominent position than required data\n- Omitting the \"Supplemental Information\" label\n- Including supplemental data that contradicts or is inconsistent with required composite returns\n- Using supplemental data to obscure poor composite performance\n\nStudy GIPS presentation standards in our CFA Ethics question bank.