Investment management firms have traditionally relied upon end-of-day data to track and report positions. Until recently, this data has been provided by an Accounting Book of Records (ABOR), but as greater automation, efficiency, and transparency are in demand across the globe, organizations are looking towards the Investment Book of Records (IBOR) to provide a more holistic, real-time view of assets and positions.
An IBOR can serve as a single data repository which streamlines and consolidates front-office, start-of-day data with back-office, end-of-day data. This is particularly useful, since it enables firms to generate a complete, real-time visualization of investment positions, transactions, and events across the organization. Furthermore, by better tracking trades and settlements as they happen throughout the day, investment managers can expedite reporting workflows, because they are no longer required to wait for end-of-day updates on closing balances.
Many firms currently have an enterprise data-management infrastructure that is siloed across multiple systems. This can make it very difficult for investment managers to see the bigger picture when it comes to assets under management, complete cash forecasting, and ensuring consistently accurate, up-to-date investment data. When compared with the functionality of an ABOR, an IBOR represents a more advanced “living and breathing” solution, because an IBOR is event-driven. It's updated each time a new event, or change in trade status takes place.
One of the primary benefits of an IBOR is its capacity to serve as a “single source of truth” for front-, middle-, and back-office initiatives. When armed with the IBOR’s visualized data on cash flows and exposure to currencies, nations and counterparties, numerous departments gain an easily digestible, singular view on all investible assets. An IBOR also specifically enables investment managers to be more proactive, since they are empowered with advanced notifications on key events, such as corporate actions, dividend announcements, the maturity of securities, and even the downgrading of counterparties.
The predictive capabilities of an IBOR deliver substantial value in the arena of risk management and mitigation. For example, an IBOR can create a comprehensive mapping of worldwide exposure, offering up warnings on how positions could be affected by another nation’s market conditions, or how other events in the global marketplace may affect investment strategies. By providing 24x7 risk analyses with investment perspectives, an IBOR enhances control when volatile conditions arise. This is very useful, because it facilitates more expedient -- and well-researched -- management decisions.
In order to implement an IBOR successfully, firms need to examine methodologically their existing data-management strategies, in addition to all the account systems that are already in use. In order for an IBOR to provide consolidated views from the front-office to the back-office, disparate systems must be able to communicate seamlessly. To accomplish this, an IBOR should be developed with a roadmap that builds upon firms’ existing enterprise architectures, without requiring an overhaul of valuable, mission-critical technological components. An IBOR implementation should also allow for horizontal scalability, as this ensures a reasonable total cost of ownership (TCO).
At the present time, European firms are collectively closer to IBOR implementations than firms in the United States. This is primarily because European firms are more driven by their exposure to global assets and the accompanying risk. However, as firms in the United States continue to diversify investment strategies by increasing exposure to global assets, they will naturally look towards IBORs as the logical next step in their organizational progressions.
With so many regulatory changes occurring in financial markets across the world, it is very likely that investment managers’ best practices will ultimately dictate the use of IBORs globally. Regardless of location, firms that embrace an IBOR before their competitors will gain a considerable advantage, while achieving key advancements in their overall enterprise data management structures.
As recent history demonstrates, the emerging industry-wide consensus is that newer data-management and reporting requirements are here to stay -- and these requirements are best satisfied through increased automation, data granularity, and transparency. With this in mind, investment managers must recognize that an IBOR will soon become a fundamental element within their organizations' enterprise data architecture and strategy.