For firms that embark on an investment book of record (IBOR) implementation, the first step is to develop a clear internal definition of what an IBOR is, because an industry consensus does not exist.
Sometimes you get lucky. On Monday, Mother Nature dumped down snow on New York and then did so again on Wednesday, with a third closing performance still scheduled for this Sunday. But on Tuesday the sky was clear, even if the sidewalks were slick.
That morning, Waters hosted an IBOR Breakfast Briefing in Midtown Manhattan, gathering end-users and vendors from around the industry to debate the latest advancements for building these systems.
What I found to be most interesting from the two panels and two presentations was that the definition of what entails an investment book of record, how it should be run and who should have control, all appear to be a moving target. Certainly, it would seem that the vendors pitching their wares have adjusted their strategy of late.
In the past, vendors seemed to present IBOR as a front-, middle- and back-office, all-encompassing data management solution. Some still do. Others may still believe that to be the case, but now they are targeting their pitches a bit more with IBOR constituting a front-office system that, first and foremost, is there to make a portfolio manager's life easier.
This played well for Jay Vyas, head of quantitative investing at the Canadian Pension Plan Investment Board (CPPIB), which manages about $173 billion. During his keynote address he made it very clear that an IBOR should be a tool to support traders and PMs, and it's not a reporting or compliance platform. The end thesis was that an IBOR is not an accounting book of record (ABOR) and should be kept completely separate from an ABOR, apart from being reconciled at end-of-day.
Barry Chester, who founded the consultancy Barry Chester & Company, said that before any firm embarks on an IBOR implementation ─ which are long, arduous and complex ─ the business leaders must first decide on how exactly they will define their IBOR.
This is an important note that may seem obvious, but is born of experience. If the back office is expecting one set of functionality and the portfolio managers are expecting something completely different, you're going to be left with a system that is tangled, inefficient and, ultimately, costly.
Vyas noted during a panel discussion that within CPPIB, his group runs its own IBOR, but that IBOR is not shared with other groups. Those groups are left to build their own. Meanwhile, BMO Asset Management's Todd Healy said that their IBOR, which took three years to build, is run across the organization. At CPPIB, PMs handle all data input; at BMO, the PMs have ceded that control.
This is all to say that there simply isn't a standardized, industry-driven definition for IBOR. So basically it's up to the firm itself to create its own clear and prescriptive definition, and stick to it.
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