The latest BOR concept to hit the financial services industry, the performance book of record (PBOR), is designed to generate accurate and transparent performance and risk numbers across business lines and asset classes. But, like its IBOR sibling, developing a PBOR can be a lengthy and convoluted process.
In a recent Waters webcast sponsored by Eagle Investment Systems, buy-side experts Tony King, manager of North America retail performance at Invesco, and Todd Healy, vice president, BMO Asset Management, discussed the operational and technology challenges facing buy-side firms embarking on a PBOR projects.
Much like an investment book of record (IBOR) or an accounting book of record (ABOR) implementation, there are clear benefits of taking up a PBOR for buy-side firms, but the path to performance data nirvana can be a challenging one from an operational standpoint.
Keep the Project Goals in Mind
The process of a PBOR implementation tends to throw up some headaches for firms that operate from a number of offices or across numerous business lines or asset classes. Extensive project planning is required from the outset, with a clear and flexible strategy in place to prevent scope creep from occurring.
"Executive buy-in is critical; there's a certain amount of politics involved," says Tony King, manager of North America retail performance at Invesco, which implemented a PBOR system three years ago. "The way we implemented it was office-by-office and product-by-product. Everybody had their own idea about what was right and what was wrong. Generally there is no right or wrong, we just had to make a choice."
BMO Asset Management in Chicago is considering the adoption of a PBOR, following a successful IBOR implementation approximately 15 months ago, and lessons have been learned from that process, especially in terms of the resources vendors can offer buy-side firms.
What a lot of firms do is simply look at the narrow definition and don't take into account that our market is evolving so fast, becoming more global with new products launched all the time. You need to future-proof as much as you can without having the project spiral out of control. - Todd Healy, BMO Asset Management
"I am a big fan of third-party consultants," says Todd Healy, vice president, BMO Asset Management. "They can come in and talk about what they have seen other firms do, what has worked and what hasn't worked, and point out potential future trends. What a lot of firms do is simply look at the narrow definition and don't take into account that our market is evolving so fast, becoming more global with new products launched all the time. You need to future-proof as much as you can without having the project spiral out of control."
Acknowledge Multiple Reporting Systems
Buy-side firms looking at the possibility of a PBOR implementation will also need to carefully evaluate what existing performance reporting and data systems are already in place. According to a survey carried out last year by Eagle Investment Systems and Waters, a quarter of industry respondents used three or more performance and risk reporting systems, while 28 percent employ an outsourced model.
"Having to manage across multiple systems, it is clear as to why there is unhappiness around the concept of a single source of performance measurement," says Richard Mailhos, product manager at software vendor Eagle Investment Systems. "Firms have to sift through asset-specific systems and this leaves them in a very disjointed place when answering questions on their entire book of record."
So when considering or planning the implementation of a PBOR, buy-side firms require a central definition of key analytics and need to standardize data inputs into what will be the core solution. Multiple accounting systems need to organized, with a clear understanding of how such data sources would be synchronized or normalized in such a way so as to build a reliable foundation of data that other groups, offices, or asset classes within the firm start to find valuable.
"Data governance and ownership is critical," says Mailhos. "Dealing with multiple sources of data and source systems or different tactical analysis systems will not go away. Firms need to understand how to take a complete view of assets and key systems, and then rationalize them in the PBOR while also understanding that different asset classes are going to have different performance measurement requirements. Data governance processes need to be able to be flexible enough to handle data in different ways while still providing a reliable enterprise-wide view of all assets."
The adoption of a PBOR can be viewed as a two-way street then; while buy-side firms can achieve greater data integrity for reporting from a single-source of performance measurement, there is also the need to consistently address the phasing of such a project as it will affect processes across numerous existing systems, business lines, and asset classes.
The Bottom Line
• PBOR implementations can be lengthy, so firms' grasp of project strategy and management is essential to stop scope creep from occurring.
• Executive buy-in when implementing a PBOR can be a critical element as enterprise-wide systems will be affected.
• Multiple reporting systems and data sources need to be taken into consideration prior to implementation.
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