Investment Book of Record (IBOR) projects have become de rigueur across the UK, Western European and US buy-side markets, thanks to their promise of delivering accurate, transparent and timely data to the front office, and by so doing, enhancing buy-side firms’ investment decisions. Victor Anderson speaks to Simitas’ Phil Tattersall about a recent study ─ a 250-page Directory of IBOR Solutions for the Buy Side 2014-2014 ─ undertaken by the London-based consultancy, the focus of which is the technology providers active in the UK IBOR market.
Q: In a sentence or two Phil, what is this study about?
Phil Tattersall: There has been some great progress recently in terms of the IBOR dialogue, and I think Waters has done a great job in curating that debate. Now the IBOR Standards Working Group has come up with a definition of the requirements that have been agreed by all those firms. That's a big step forward and we felt that the next step should be to establish how vendors can support firms in terms of IBOR projects, given that most firms don't want to build the technology themselves. That is the core of this directory ─ 17 vendors have described how they meet the requirements defined by the IBOR Standards Working Group.
Q: What were the drivers for undertaking this study? Why now and why this study?
Tattersall: There was a bit of a "Tower of Babel" scenario ─ confusion around what an IBOR is and how to undertake such projects ─ although Waters' efforts and those of the IBOR Standards Working Group have helped in terms of identifying the requirements that constitute an IBOR. However, a lot of firms don't want to build the technology themselves. They will build some stuff, but if vendors can help them then typically they will go to the vendors. So that's the motivation ─ how vendors can help buy-side firms in terms of delivering an IBOR capability.
Q: What was the response like from the vendor community?
Tattersall: It was good. We asked vendors to participate and all those featured in the directory were keen to move the IBOR debate forward. They see the benefits for the clients and themselves.
Q: Did you speak to any end-users when undertaking the study?
Tattersall: No. We have ongoing dialogue with the buy side and so specific feedback from end-users was not part of this study. But we have been involved in information gathering [collecting feedback from buy-side firms] over the past couple of years anyway. This directory is all about getting the vendor perspective in terms of how they meet these requirements. What's interesting is that they come from different backgrounds and heritages and therefore have different perspectives. Cumulatively, it's a very rich picture.
Q: How do buy-side firms make the business case for undertaking IBOR projects, given that they tend to be lengthy and hugely expensive undertakings?
Tattersall: That is the big challenge. It's not so much the implementation but rather making the business case that is the real challenge. It's a big selling exercise and what you've got to be aware of is that it's not just making the business case ─ you've got to ensure enduring sponsorship [for such initiatives]. For us, it's about the challenges that buy-side firms face at the moment, the benefits that an IBOR will provide in terms of how consumers will derive value from it, and then keeping the message and momentum by identifying what those benefits are, and tracking their delivery.
It's not so much the implementation but rather making the business case that is the real challenge. It's a big selling exercise and what you've got to be aware of is that it's not just making the business case ─ you've got to ensure enduring sponsorship [for such initiatives].
Q: Let's talk about the ownership of the project for a moment. Who is best placed within buy-side firms to champion an IBOR project?
Tattersall: I think that's changing. In the past, if at all possible, it would be someone in the business community. There is an evolution and it's come with the appointment of chief data officers (CDOs). We see that typically where there are CDOs in place, they will have responsibility [for overall control of the IBOR project]. CDOs typically have broad set of responsibilities that include positions and providing good data to the front office, and so it naturally fits with the CDO, where one exists.
Q: Are you aware of any IBOR projects where the value that it provides the front office in terms of allowing personnel to make more judicious investment decisions has been quantified?
Tattersall: I haven't seen that it terms of the projects that we've worked on. In the directory, we reference another consulting firm where they have tried to link improved investment performance to improved operations. The link they have identified is known as the "data mediation burden," which refers to the scenario where, if you can reduce the burden around the data that needs to managed in the investment process, you will see improved performance. But it's astonishingly difficult to quantify.
Q: How would one go about quantifying success in terms of IBOR projects? What metrics would you use?
Tattersall: I've never seen anyone do it fully, but I have seen firms adopt three different aspects that could be part of the total solution. The first is about talking to the consumers ─ the front office ─ to assess how much time they spent on their data management before and after an IBOR had been implemented. You will be able to see a significant different in those two phases. Second, we've seen people try to quantify the additional business agility an IBOR provides the firm. If it took a firm six months to launch a new product without an IBOR, it might only take them three months to launch the same product with an IBOR, so there is definitely a time benefit there. The third thing ─ which we haven't actually seen, although it is possible ─ is attempting to benchmark user satisfaction.
Q: What do you say to buy-side firms that might need convincing that an IBOR will be beneficial to the business?
Tattersall: We tend to agree with them if they are unconvinced of the need for an IBOR right now. We believe that all investment managers are different and for some firms, I don't think it's necessarily the right thing for them right now. We've introduced the concept of an IBOR strategic framework because firms are in different situations. In one of Waters' webinars, when asked about the business case for an IBOR, 8% of the audience believed the business benefit was overstated, while in the same poll, 35% felt that all buy-side firms could benefit from an IBOR. What we tried to capture with the strategic framework are the dimensions that lead firms to either needing an IBOR urgently or not right now.
Q: Were there any surprising findings in the study?
Tattersall: There were two major things. First, the vendors have refined their propositions relatively quickly. Back in 2009, I helped a firm on an IBOR selection and at the time it was very much the manager educating the vendors. But the vendors have definitely learned and are bringing their expertise to the IBOR dialogue. And second, while we respect that everyone is different, we also believe that in the future every investment manager will have an IBOR, because clients and regulators will come to expect it. If you look at pre-trade compliance, that function was only really introduced and automated in the leading buy-side firms in the late 1990's, but by 2010 is was expected. We think that as investment consultants and regulators become aware of the challenges and risks associated with long and complex data supply chains, they will begin to expect that in more complex situations firms will have an IBOR.
Q: How did you become the UK investment management industry's "Mr. IBOR?" Was that by fluke or by design?
Tattersall: It was a total fluke and I was very lucky. When I was at Barclays Global Investors (BGI), which had done a lot of good work before my time there, they came up with the IBOR concept. That started a long time ago and they carried on developing that. In fact in about 2007 there was an idea about introducing a global IBOR for BGI, and I was the project manager for that initiative. From about 2009 we have helped firms who early on didn't know the term "IBOR" but knew they had a problem supplying good data for the front office.
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