IBOR special report

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IBOR: Business Benefits But at a Cost

The investment book of record (IBOR) has had a short but interesting history, marked by a phase of indifference followed by a period of intense appeal. Barclays Global Investors claims to have built the first such system back in 1999, but from there the IBOR trail turned cold and the underlying technologies and business drivers were apparently forgotten. It was some time after the global financial crisis that IBOR started buzzing again, as vendors began hawking such solutions to the buy side, and asset managers began multi-year implementations, convinced of IBOR's business case.

These days you can't have a conversation about portfolio management without IBOR being mentioned. The vendors that sell the technology evangelize about its benefits to traders and portfolio managers as well as to those in the middle and back office. Advocates argue that all but the smallest buy-side shops would benefit from switching from spreadsheets to an IBOR.

Aggregating positional data for accurate start-of-day and intra-day portfolio views is not a novel concept, and to some degree, it can be done without an IBOR. But it is manually intensive and time-consuming, and a waste of a portfolio manager's time. Data is often siloed by business line or asset class, so it can't be retrieved with the push of a button. However, IBOR's biggest advantage is that it automatically centralizes firms' holdings data; it processes trades, corporate actions, and other events; and can spit out updated reports in real time. In short, it creates a single version of the truth and shows users, on demand, what that version is.

Ideally, this holistic view of data results in better investment decisions by buyside fi rms. But as you'll read in the Q&A section, Igor Lobanov of UK-based Legal and General Investment Management has a twist on that assumption. Lobanov and Canada Pension Plan Investment Board CTO Jeffrey Hurley give their takes on the advantages and disadvantages of IBOR technology in this report.

This is Waters' second IBOR special report in six months, which says something about the level of interest in the IBOR phenomenon, although there are still technology and operational challenges associated with it: integration of order, execution and portfolio management systems, for example, or the considerable time and complexity it takes to install the underlying technology. However, with the aid of reports like this one, firms will at least understand better what they're up against.

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