April 11, 2014

In recent years, investment managers have increasingly looked to develop one consistent, accurate and up-to-date overview of a company’s assets across all of its businesses throughout the day. This has led to the development of the concept of an Investment Book of Record (IBOR).

Marc Firenze, Eagle Investment Systems
Marc Firenze, Eagle Investment Systems
A renewed focus on IBOR is being driven by a number of factors. Investment managers are faced with an ever-increasing amount of information to process and consolidate, from a wider range of complex instruments. This is coupled with a regulatory landscape that is shifting towards greater transparency and accountability.

The most important driver, however, comes from the need for a competitive advantage. The front-office is increasingly looking at the accuracy and timeliness of information as a way to improve the decision making process and reduce trading errors. This commercial pressure is making the development of an IBOR a priority for many firms.

In practice this can seem much more easily said than done. We recently commissioned a survey of senior executives at investment management companies and asset managers to look at their current practices around IBOR and portfolio management and were surprised to find that one in three said an IBOR was ‘out of reach’ for their organization.

A truly accurate and consistent IBOR remains elusive for so many, and as such reveals a fundamental data management issue investment managers are facing. Many firms find themselves – more through circumstance than design – with inflexible portfolio management infrastructures that hinder – or prevent entirely – the ability to have a timely and consolidated view of their assets.

Often these firms have multiple accounting and processing systems in place that have been inherited through acquisitions or built on top of their existing portfolio management system as they’ve entered new asset classes or territories. Over half of the investment firms surveyed in our study are using anywhere from two to eight systems from which to compile their IBOR. As well as making the process extremely complicated, using so many systems increases the risk of inaccurate reporting.

Factor into this that many firms outsource their middle and back office functions, leaving access to accounting information one step further removed from the front-office, and it’s easy to understand why creating an IBOR that meets the needs of the front-office can be such a challenge.

A successful IBOR delivery has enterprise data management (EDM) at its core. A data-centric approach, with a single, consolidated view of all assets with the level of detail required with data loaded directly from multiple best-of-breed systems, is the optimum way to achieve this. This single source of data helps firms make investment business decisions providing access to the underlying, granular details they need. Furthermore, because data is not being created, there is less need for reconciliation creating more accurate data available more immediately.

The IBOR is not a new concept, but it’s one that the industry has latched onto recently. The benefits are access to timely and accurate data in the decision-making process, and in this time of increased competition, mitigating the risks associated with data. In turn, this is leading firms to ask themselves searching questions about their data management practices.

—Marc Firenze is chief technology officer at Eagle Investment Systems. Firenze drives the software, technology and architecture decisions across Eagle's investment management suite.

As chief technology officer of Eagle Investment Systems, Marc Firenze drives the software, technology and architecture decisions across Eagle's investment management ...