Paul Westgate, product manager, Linedata
Much has been written over the past couple of years on the subject of IBOR – the Investment Book of Records. These discussions tend to focus, quite rightly, on the benefits of an IBOR, inferring that a true IBOR solution exists today. Can firms move from inadequate present day systems and access the benefits of IBOR in a single step? The reality is that the ultimate IBOR is yet to arrive. It is time for firms to take a more practical, bite-sized approach to IBOR.
Far more significant than the existence of the ultimate IBOR is the need for fundamental change across a business. What is more, various functions and divisions within a firm will have different system and data requirements. Without recognising these needs and the change that is required, asset managers will be unable to effectively use an ultimate IBOR when it does come into existence.
Take, for example, a front-office order management or trading system. Moving to a true IBOR system means moving away from a single ‘start of day’ refresh and internal position management in favour of constantly referring to the positions maintained by the IBOR. This would be a significant change and one that is needed before a true IBOR can realise its full benefit. This is also the case for any other systems using investment position data.
Today’s IBOR is more of a concept that is yet to evolve into a real tool. After all, asset managers are not really asking for a new system: it is about getting better quality data. Even IBOR’s leading proponents recognise that the implementation of a catch-all system will take considerable time. Deploying an IBOR successfully must be a journey with staged benefits, rather than a big bang solution.
Are there no systems that are currently capable of acting as an IBOR then? The ultimate IBOR is still a way off. There are practical IBOR solutions available that can overcome perceived system deficiencies and offer immediate value until they can develop into an ultimate IBOR. For many, a practical solution in the shorter term could, for example, improve the start of day position, especially the cash position, given to the front office, provide intraday updates or give an independent set of records between the business and outsourced service providers.
Merely rebadging a system as an IBOR while still retaining its original purpose and usual operation may be tempting, but will be unlikely to deliver IBOR benefits. One possible solution may be found in adapting the fund accounting process. Ironically, these systems are often cited as not being able to properly support an IBOR. This may be true if the system is operating in a rigid ‘end of day’ way. However, fund accounting systems are likely to have the fundamental position keeping and management facilities needed for a practical IBOR. Still more, these are tried and tested mechanisms. In addition, if these processes can be separated from pure accounting facilities, freed from an accounting timeframe and offered specifically for IBOR, they can be an effective IBOR, without the accounting baggage.
A strong, practical IBOR solution will already have a high degree of automation, data ingest and distribution, and the facility for multiple user defined position views, ideally accessed via an application programming interface. Key features of the IBOR would be the ability for it to fit into different business models and, most importantly, the ability for it to be reconfigured and further developed to move closer to the ultimate solution.
The holy grail of the ultimate IBOR is yet to arrive. In the quest to implement a genuine IBOR throughout the business, firms must take a practical approach and adopt bite-sized solutions to achieve IBOR benefits. Asset managers should take note.