Marketing Rule FAQ Checklist: 5 Requirements to Satisfy Safe Harbor on Extracted Performance

On March 19, 2025, the SEC staff published a Marketing FAQ with new guidance on extracted performance and how to navigate the performance versus investment characteristic question—some of the trickiest aspects of the Marketing Rule, which was initially adopted in 2020.

We’ve developed this checklist to help advisers apply this new guidance to their portfolio. (You may also want to check out our supporting piece on Portfolio or Investment Characteristics, here). Feel free to print it off and reference it often.

Overview: What is Extracted Performance?

Extracted performance is one investment or a group of investments in a private fund or other portfolio (an “extract”). An extract is the performance of a single investment, like a case study, or a subset of investments extracted from a single portfolio. The Marketing Rule defines a “portfolio” to mean a group of investments managed by the investment adviser.  A portfolio may be an account or a private fund and includes, but is not limited to, a portfolio for the account of the investment adviser or its advisory affiliate.

Extracted Performance Advertisements

Displaying the performance of an “extract” in an advertisement is required to be shown on a net-of-fees basis under the Marketing Rule, just like every other type of performance. This creates a challenge to calculate net fees at the investment level.

Gross Extracted Performance Safe Harbor Checklist

 According to its recent FAQ, SEC staff will not recommend an enforcement action if adviser marketing displays gross performance of an extract as long as the following conditions are met:

• Identify the Extract as Gross Performance – Labelled “Gross” or clearly identified as not reflecting the deduction of all fees and expenses that a client or investor has paid or would have paid.
• Show Total Gross and Net Performance Consistent with the Marketing Rule – Present the total portfolio’s gross and net performance consistent with all of the Marketing Rule’s requirements for performance, such as the prescribed one-, five-, and ten-year periods for performance in each case, other than any private fund.
• Show Total Gross and Net Performance with Equal Prominence – Present the total portfolio’s gross and net performance with equal prominence, such as the same size font and level of attention within the advertisement.
• Facilitate Comparison of the Extract to the Total Performance – Show the total portfolio gross and net performance on the same page as or a prior page to the extract to facilitate comparison.
• Calculate the Total Performance over a Time Period that Contains the Extract – The time period for the total performance must include the entire period of the extract. Extract time periods must be calculated over a single, clearly disclosed period, though it does not have to calculated over the entire time period required for the total performance.

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