Front-Office Data Focus Spurs IBOR Push

Nobody really cared about data until the front office cared about it. So says one technical specialist at a UK-based asset management company, when asked about the drivers behind a sudden surge in buy-side interest around the concept of an Investment Book of Record (IBOR). It’s a sentiment that’s often repeated when discussing the topic, which centers on a simple idea: generating a consistent and reliable source of information, which can be used to support investment decisions and the processes around them from the front to the back office.

Typically, the data landscape around this area in buy-side firms has been a fragmented one. While a competent order management system (OMS) will handle position-keeping, overnight accounting batches will provide one view of holdings and cash levels, while risk analysts and portfolio managers might have their own customized views, which, in most scenarios, will provide them with more current analyses. Combining multiple data sources in a variety of formats from various vendors creates a picture of operational risk that is hard to ignore.

“The upper management would almost solely be constituted from front-office people, historically,” says Jon Rushman, professor of practice at Warwick Business School (WBS) and a former managing director at investment manager, BlackRock.

“The operations teams were left to develop standalone systems, often repeating this position-keeping function in every department,” Rushman says. “There’s a view in compliance, in accounting, derivatives margining, and so on, and they are never coordinated because buy-side firms couldn’t install a company-wide platform. Now, the front office has woken up to the fact that they really need this. It’s on the agenda, and I think that people have seen what you can do if you have a single view of your current trading position, constantly available to anyone within the organization. If it’s a single view, and everyone feeds off that, the efficiency gains are enormous.”

One of the reasons why buy-side firms are looking to develop this “single view of the truth” is due to high-value staff like portfolio managers spending large amounts of time performing tasks unrelated to their core competencies—data management assignments, for example.

“For us, IBOR isn’t an end in itself. We’re looking at building a data hub, which will present a consolidated view of reference and market data, as well as operational data generated by supporting business processes such as trades, orders and positions.” —Igor Lobanov, Legal & General Investment Management

“If you’re a successful investment manager then you do intra-day updates anyway, and you do have accurate data at hand, but the question is how much time you spend doing that,” says Igor Lobanov, enterprise architect at London-based buy-side firm Legal & General Investment Management, which manages £370 billion ($552 billion). “If you look across all the fund managers and their assistants, and work out how much the full-time equivalent of doing that work comes to, you can get up to 50 percent of all the front-office personnel running data management instead of investment management. Allowing high-value personnel to focus on their core competencies helps build a business case for developing an IBOR system.”