Twenty-three years ago, when I entered the investment management consulting space, many investment firms were focused on finding the “best-of-breed” portfolio accounting system that could address the risks posed by numerous manual and automated internal processes and/or to reduce the overhead costs required to maintain internally developed systems. Asset managers were searching for the “single source of truth” on their investments under management and available cash as of trade-date to facilitate and support the investment decision making process.
Portfolio accounting system vendors flourished as they demonstrated their expertise in providing an accurate point-in-time and/or real-time trade-date accounting record and cash balance for the various asset types under management. They promoted the ease of access to this data via reports, extracts, warehouses, and datamarts for use by upstream and downstream subscribers. In parallel, outsourcing providers were also expanding into or touting existing abilities to support the middle office portfolio accounting function. Extract transform load (ETL) vendors also captured market share aiding the investment management technology teams integrating their new best-of-breed systems.
In my approximation, it was 14 years ago that we began hearing the term IBOR—short for investment book of record (coinage of the term cannot be located on Google so it’s lost to history). The debate was on. Was an IBOR the portfolio accounting system implemented by so many investment management firms already or was it something more? Regardless of how an end-user defined IBOR, the best-of-breed vendors focused on this space worked to enrich and enhance their applications to do more; new security types, reference data management, client relationship management, performance and attribution, and so on.
Over time, however, multi-asset managers were recognizing that their “single source of truth” was no longer viable as they expanded their investments into OTC derivatives, bank loans, private equity, private markets, and real-estate. They now needed applicable accounting, tracking, and valuation engines to support these asset classes. The singular IBOR dream was morphing into a multiple IBOR nightmare for many asset managers.
Meanwhile, in the past decade, best-of-breed order management system vendors were determined to shake up the pre-conception that IBORs were the primary tool of the middle office and were determined to bring the function into the front office toolset. To further muddy the waters, data warehouse, data lake, data consolidation vendors, and cloud providers put it on the line and rolled out solutions to bring your multiple sources of IBOR data into a manageable framework.
In recent years, asset managers—exhausted by the complexity of integrating multiple best-of-breed systems—have been determined to simplify their target operating model and system architecture and are now in search of the singular vendor or outsourcing solution to meet their ever-growing needs. Software vendors and outsourcing providers that anticipated this growing need have responded with acquisitions of leading solutions to expand their product line and provide a front-to-back solution (more on that topic here). Partnerships and alliances have formed between complementary vendors to facilitate the integration and flow of data so that investment managers could achieve their dream.
IBOR has evolved and continues to evolve. The definition is no longer limited to the “trade-date portfolio accounting engine” and now encompasses the ability to present a consumable, reportable, pliable, holistic portfolio view of all asset types under management and their respective referential data to facilitate the investment decision making process.
In light of this evolution, perhaps it is time to retire the term IBOR and coin a new term? I will leave that decision to the marketing teams.
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