For investment management firms, getting a complete view of start of day, end of day and intra-day positions, as well as investable cash, is often a challenge.
The difficulty lies in the fact that data is often split by asset classes and geographies and lives across the organization in distinct silos managed by separate teams, which can make harnessing the value of its findings much more complicated. Furthermore, there is enormous risk caused by disparate data sets, including missed investment opportunities and compliance breaches from holding large cash positions or incurred unnecessary expenses from balances that are not enough to settle transactions.
At risk of leaving returns on the table, more and more firms are seeking to create a comprehensive repository for timely and consistent data. This has led to the emerging Investment Book of Record (IBOR) -- one proposed solution to clarify and manage investment data from the front to the back office. The idea behind an IBOR is that it provides investment managers with a real-time, holistic view into investment data across the entire organization -- reducing latency and improving the timeliness of data for ad-hoc client reporting, investment analysis and feeds to other systems.
[To learn more about IBOR and how the buy side is approaching business challenges, read: What's Inside the Buy Side's Survival Kit?].
But does an IBOR really live up to the promise, and would it work for every firm?
To tackle and eventually solve the data dilemma, investment managers must first understand the potential of an IBOR before they can determine if it will have an impact on their organization. While evaluating whether implementing an IBOR is the right move, it's important to consider its three key attributes:
Power Of Data Aggregation
The power to aggregate data from multiple internal and external sources, including performance and risk statistics, accounting information, and market and trade activity into a single, consistent repository is important. By implementing an IBOR, firms can cut out the valuable time and resources spent combing through the vast universe of available investment data and instead focus on leveraging the IBOR to take corrective action, whether it is for the refinement of investment strategies, regulatory control or client mandates.
The capacity for continuous position processing to provide real-time insights as new events occur can also be achieved. This includes trades, corporate actions, and currency and price movements as well as changes in classification. In theory, an IBOR would appeal to today's fast-paced financial environment and adhere to the increased regulation at both national and international levels by providing an intra-day investment view, rather than having data warehouses updated in batch process on an end-of-day basis. With a regularly updated source of clean data, decision makers are able to minimize risk by avoiding action based on incorrect or incomplete information. This is especially critical for firms operating globally that must access investment and analytical information seamlessly from any location across the world at every hour of the day.
An IBOR can also provide the ability to customize output to make it easier for wealth and institutional asset managers to act upon the insights provided. Experiencing increased pressure from clients for improved ad-hoc reporting, the IBOR would deliver frequent updates, richer information and the ability to support ad-hoc queries and analysis, in an easy-to-distribute format that's right for them, whether it be in an interactive online format, printed report, digital-as-a-file transfer or for downstream systems.
Whether an IBOR is the solution investment management firms have been looking for remains to be seen. However, the fact that organizations are weighing its merits proves that it is finally time for the industry to address the challenges brought about by an increased volume of data, particularly as it relates to funneling that information throughout an entire firm. More importantly, by rethinking the way technology and business processes are coordinated at a fundamental level, investment management firms can ensure they are on the right track to controlling costs, meeting regulatory requirements and improving execution on investment opportunity.
About The Author:
Rick McCarthy is DST Global Solutions' Managing Director of North America. McCarthy started his career with SunGard and has held several senior positions including Group CEO of SunGard Energy, Vice President of Asia Pacific and President of SunGard affiliate Renaissance Software. McCarthy holds a Masters degree from Thunderbird School of Global Management.