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For the past few years, fund managers and compliance officers have wrestled with strict SEC requirements when advertising investment performance. Now, the SEC has eased those burdens with its update to the Marketing Rule FAQs. The new guidance allows managers to showcase certain performance results on a gross basis without showing separate net returns in every case, as long as they meet specific conditions to keep the presentation fair and not misleading.
In the past, the SEC’s 2021 Marketing Rule required that any gross performance figure in an advertisement be accompanied by a net performance figure for the same period, including for each specific investment or specific metric. This made it tricky to highlight individual successes or unique portfolio metrics without cumbersome calculations. In March 2025, the SEC’s Division of Investment Management updated its Marketing Rule FAQs to address two key areas of confusion, “extracted performance” and portfolio / investment characteristics, providing much-needed flexibility for advisers. This update is a welcome relief to firms that have been struggling with how to comply under the old interpretation.
Extracted performance: Highlighting a slice of the portfolio
“Extracted performance” refers to the performance of a single investment or a subgroup of investments taken from a larger portfolio. For example, this can be the return of a single private fund investment, or a single strategy within a multi-strategy fund. Under the prior guidance from 2023, any such subset was treated as advertising performance, meaning if you showed an extracted investment’s gross return, you also had to show its net return. This is something that was often impractical to calculate and of questionable value to investors. Many advisers simply avoided showing one-off investment results because allocating exact fees to one position or deal was cumbersome, inaccurate, and led to inconsistent practices across the industry.
The March 2025 FAQ update reverses that stance. The SEC staff now say an adviser may present the gross performance of an individual investment (or group of investments) without a side-by-side net figure for that specific investment or group of investments, provided that certain safeguards are in place. In essence, the advertisement must also include the full portfolio’s performance, both gross and net, as context. The staff explains that, if the overall portfolio’s returns (net and gross) are shown prominently and cover the same period as the extract, then showing just the extracted performance’s gross return isn’t likely to mislead investors.
To rely on this new flexibility, advisers should ensure they:
- clearly label the extract’s results as gross (before fees)
- present the total portfolio’s gross and net performance alongside it, with at least equal prominence and in an easily comparable format
- use a period for the overall portfolio that encompasses the extract’s performance period.
If those conditions are met, and the overall presentation isn’t otherwise misleading, the SEC won’t take enforcement action over the omission of the net number for the extracted performance.
Portfolio characteristics: Clarity on performance metrics
Another gray area resolved by the new FAQs is how to handle various portfolio or investment “characteristics”: the statistics and metrics that describe a portfolio’s composition or risk / return profile. The Marketing Rule didn’t define “performance,” leaving firms unsure whether metrics like yield, volatility, Sharpe ratio, or attribution analysis count as “performance” that would trigger the gross / net requirement. Some managers took a conservative approach, calculating net-of-fee versions of such metrics or avoiding them altogether, even when doing so was complex or didn’t make logical sense. The SEC acknowledged this dilemma, noting that determining fees’ impact on certain stats can be “impossible or lead to misleading or confusing results.”
Under the updated guidance, advisers can include these portfolio and investment characteristics in advertisements on a gross basis without always needing to show a corresponding net figure. As with extracted performance, the same conditions apply. The metric must be clearly identified as gross, and the advertisement should display the total portfolio’s net and gross performance covering the time period relevant to the metric. Those overall returns need to be shown with equal prominence and in a format that lets the reader compare them to the metric at a glance.
The SEC didn’t explicitly identify which metrics count as “performance” and which do not. It provided examples such as yield, contribution to return, and risk ratios as items that could be treated under this gross-only approach. Meanwhile, traditional return measures such as total return, IRR, or ROI are still firmly considered performance and must follow strict gross / net presentation rules.
Improving clarity: What this means for fund marketing
This policy shift by the SEC staff loosens the handcuffs on performance advertising. It marks a significant change from the prior interpretation, which forced net-of-fees figures for every sliced-and-diced performance number. It should also help reduce the compliance angst around marketing presentations. Essentially, as long as you give investors a complete picture of how the overall portfolio performed including fees, you’re allowed to zoom in on interesting pieces of the story in their gross form.
This approach can improve clarity for investors rather than seeing awkwardly derived “net volatility” or other obscure figures. They see the actual metric, plus a straightforward disclosure of the portfolio’s net returns for context. Of course, advisers must still ensure that the advertisement as a whole isn’t misleading (i.e. cherry-picking), and that all data complies with the Marketing Rule’s general anti-fraud prohibitions.
Practical takeaways: What advisers and compliance teams can do
Review and refresh marketing materials: Revisit your pitchbooks, fact sheets, and other advertisements to identify any performance snippets or stats you’ve been omitting or presenting due to the old net performance guidance. With the new flexibility, you may be able to include those highlights in a compliant way. Ensure that, for any such extracted performance or metric, the materials also include a prominent section showing the total portfolio’s net and gross performance for the relevant time period.
Label gross figures and provide context: When showing an individual investment’s return or a portfolio characteristic, clearly label it as gross of fees and cross-reference the full portfolio performance provided. Include a note if needed that the figure “does not reflect the deduction of fees/expenses.” Alongside this info, present the overall portfolio’s performance, both gross and net, covering the same timeframe. Ensure these overall performance numbers are at least as prominent as the extracted performance or metric, so readers can easily compare them.
Update policies and train staff: Incorporate the SEC’s new guidance into your compliance policies and procedures. For example, your internal review checklists for marketing materials should be updated to reflect that extracted performance and certain characteristics can be shown gross-only if the required accompanying information is present. Train your marketing teams and compliance reviewers on those conditions so that everyone knows the new “dos and don’ts.” Going forward, any advertisement that takes advantage of this flexibility should be vetted to confirm it meets all the outlined criteria (clear labeling, complete portfolio performance shown, appropriate time periods, etc.). Documentation of these reviews will also help demonstrate compliance if regulators ask.
How can Bovill Newgate help you understand and incorporate the FAQ guidance?
If you’re a fund manager or compliance officer, our team can help you better align your business to meet these regulatory obligations. We offer ongoing support options to make sure your compliance function and organization is fully aware of the latest regulatory updates.
We can also help you identify challenges and pursue opportunities by conducting regulatory due diligence reviews, evaluations of your compliance environment, and provide your staff with customised training suited to your unique business needs.
If you would like to talk more about the points mentioned above, get in touch.
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