Sponsors have – for good reason – approached the use of hypothetical performance and other non-standard track records with caution, as the SEC has repeatedly indicated an inclination to view them with distrust. That may have changed, however, when the SEC’s amendments to Section 206(4)‑1 under the Investment Advisers Act of 1940 (Marketing Rule) recently became effective. Now, managers can proceed with relative confidence by incorporating the framework in the Marketing Rule when building policies and procedures around the use of non-standard track records in their marketing materials. This first article in a two-part series discusses why sponsors use non-standard track records and what conditions sponsors must satisfy to use hypothetical performance under the Marketing Rule. The second article will describe the prevalence of non-standard track records and the Marketing Rule’s guidelines for using related, extracted and predecessor performance, as well as past specific recommendations. See our three-part series on operational deficiencies in non-standard performance calculations: “Common Process Issues” (Feb. 9, 2021); “Common Recordkeeping and Disclosure Issues” (Feb. 16, 2021); and “Nuts and Bolts of Upgrading Controls” (Feb. 23, 2021).