Our industry loves to rally around new solutions to old problems, giving them buzzwords and acronyms that get proliferated until they lose their initial meaning or worse, lead to many meanings. We often forget about the desired outcome that we set out for in the first place, or the cost to get there. Buzz around buy-side solutions come and go. Do you remember the industry-wide pursuit of straight through processing (STP)? After years of STP and operational efficiency projects, many firms squeezed out all they could. Solving for the remaining processes came at a cost that didn’t always come with a positive return, so the middle and back offices turned to solutions that more directly benefited the front office and their clients. The need to manage position data remained as an unmet need at many organizations and its solution, the Investment Book of Record (IBOR), remained unproven.
What is an IBOR?
IBOR stands for Investment Book of Record. It is a platform or software system that provides timely, accurate, and complete position data delivered at the start, intra and end of each trading day to support the investment lifecycle.
In Colleen Devine’s 2021 blog, The Evolution of IBOR, she estimates that we first heard the term IBOR as a solution in the mid 2000’s. We designed “best of breed” solutions to get to a “single source of the truth,” selecting from the best available OMS or OMS’s, data warehouse, reference data management tools, investment accounting system, and all the rest. We expected the model to scale to support our growth. With the eventual expansion by many asset managers into new locations across the globe and into new derivative and private investments, “the singular IBOR dream was morphing into a multiple IBOR nightmare.”
By the mid 2010’s, the IBOR solution, at least as we knew it at the time, had run its course. Not that we stopped trying to achieve it, just that the IBOR projects had not yet lived up to the lofty goals set out by the architects. Its ambiguous definition and real benefits were first challenged by Tom Secaur in his 2016 blog, Don't Believe the Hype, cautioning us to perform proper due diligence before making large investments into the hype. By then, a series of projects with questionable ROI littered the landscape and our industry had already moved onto the next problem to solve.
Now we fast forward almost another decade, and the same problems are staring back at us. Unscalable middle offices, rogue data management in the front office, disparate data across asset types and products, and a newer list of legacy or obsolete technologies that attempted to piece together a holistic solution and no longer—or maybe never—delivered the goods. Couple these with the continuously changing environment in asset management with mergers and acquisitions, continued growth into new products and investments, and the increasing expectations of clients, prospects and regulators to receive near real-time, quality data, regardless of the investment type, product or domicile.
With that context, I offer this take: IBOR is ready! We are now in the best position ever to deliver what we said we would with IBOR. Taking years of learnings and combining that with the latest service and technology offerings is leading us to the conclusion that IBOR is more achievable than ever. So what’s changed?
1. Custodians got wise to IBOR.
They realized the power of combining large scale middle office services and technology with their traditional asset servicing offering. Yes, they’ve been offering these services for quite a while but there is a steep learning curve here and technical debt so it can take a decade for a ship to change course. Also, acquiring the technology to support these offerings didn’t come with the expertise to deliver holistic, front, middle and back-office solutions either. It takes time and we are now seeing the fruits of their investments.
2. The OMS vendor technologies have matured.
They have added complementary IBOR capabilities to what were traditionally filled by other vendor products or in-house builds. Prior iterations of IBOR required the buy side to seed the start of each trading day with holdings, inclusive of corporate actions and accruals. Now, many OMS’s produce their own start of day view of position data and manage a broader range of intraday events. These capabilities can eliminate some legacy technology from the asset manager’s ecosystem and in some cases, can remove an investment accounting system from the loop. An IBOR capability that is close to the OMS can draw from a consistent set of reference data and produce a more complete and integrated data set to make investment decisions from, pushing the benefits of IBOR more directly to the front office.
3. Last and most certainly not least; new, cloud based and cloud native technology in the investment accounting and data management space have changed the way we think about the old IBOR model.
Obviously, new is good. Cloud is good. But now, when we consider an IBOR solution with these new technologies, we have additional benefits that can be added to the inherent IBOR list, making for a better total business case and ROI. Just to name a few…
All investment data, not just IBOR, in one place. Combined data store for IBOR with accounting book of record (ABOR), performance measurement, risk and analytics, and reference data
Oversight capabilities to augment those controls done by third party administrators
Automation and AI that shift exception handling from static rules based to dynamic learning based across the full trade and position management life cycle
From just another buzzword to reality? I predict the most successful programs will combine all of the above; IBOR-related services and the newest technology with other, complementary solutions. We will in turn, finally meet our original goal and deliver what was promised decades ago.