April 2014: When It Comes to IBOR, a Stitch in Time ...

It’s been 15 years since I left the teaching world, but in some respects it feels like yesterday. As director of sport, I was involved in just about every aspect of sports, from teaching open-water lifesaving skills to throwing javelins, although the latter on two occasions almost spilled over to “life skills” lessons about how to best deal with sports-related trauma injuries.

Back in the mid- to late-1990s, most South African schools with active sports programs were weighing up the benefits and costs of building artificial playing surfaces for field hockey. I remember arguing with the school’s bursar that we should bite the bullet and build an AstroTurf pitch sooner rather than later, because in a decade, every South African school serious about its sports would have such a facility and the costs had already started rising. Unfortunately, my rationale fell on deaf ears and I left my final post with the hockey teams still playing their matches on grass, which, irrespective of how well manicured the school’s six hockey pitches were, was still a poor alternative to AstroTurf.

In many ways, buy-side firms of all ilk are at a similar stage, although their challenge centers on the development of an investment book of record (IBOR), a move that all would concede they need to make, although relatively few to date have actually made it. For buy-side firms, an IBOR—which aims to provide portfolio managers with accurate, reliable and transparent locally and globally aggregated position data, delivered to them in the formats they require by the firm’s accounting platform at the start of the trading day—represents the melding and formalization of a number of activities that most buy-side shops have hitherto been managing, albeit in a siloed, disparate manner.

Like pitches made of artificial turf, the benefits are obvious: An IBOR allows for more judicious investment decisions as portfolio managers and traders can track their progress throughout the day; it supports far more effective cash management practices; it helps in understanding exposures across counterparties, asset classes, and geographies; and it allows for the production of regular management and more meaningful client reports. There is a catch, however: These projects can be daunting, even for buy-side firms with deep pockets and extensive IT resources. But in a decade’s time, I doubt that any buy-side firm with sizable institutional mandates will not have such a system in place. So, a stitch in time now—regardless of how long and how operationally disruptive it might turn out to be—will save many down the line, which makes both business and economic sense.

And in case you’re wondering whether the school ever got around to installing that pitch, it did, shortly after I left. And what’s more, it went the whole hog and built one of the finest water-based pitches in the country.