Murray Bender: RBC Investor & Treasury Services is pleased to present insights on the opportunities and challenges facing the financial services community.
Today’s podcast features Ben Pumfrett, Director of Middle Office Product Management at RBC Investor & Treasury Services, discussing the Investment Book of Records, and how it supports asset managers. Thanks for joining us, Ben.
Ben Pumfrett: Thanks, Murray. Glad to be here.
Murray Bender: To start off, Ben, can you tell us exactly what is the Investment Book of Records, or IBOR as it’s commonly referred to, and what role does IBOR play in supporting asset managers?
Ben Pumfrett: So, the IBOR, Investment Book of Records, is really the traded Book of Records. So, different to accounting or custody, which provides you that settlement book of record, the Investment Book of Records is really a trading view of an asset manager’s investments, so both from a holdings and cash perspective. And, really, it is that golden record or central record for the asset manager that allows them to see all their holdings across their different fund ranges or the mandates they are running, as well as providing them cash balance and cash forecasting ability for them to use to make further investment decisions or manage their liquidity.
It really sits there at the heart of the asset manager’s operations to provide that information back into their front office to support their portfolio managers, and oversight for their operations. The vital thing about the IBOR is that it’s provider- or custodian-agnostic, so despite all the underlying back-office relationships that there may be, the IBOR acts as that central, consolidated record for the asset manager.
Murray Bender: So, why has the Investment Book of Records risen to prominence recently, Ben?
Ben Pumfrett: So, really, the main reason is that demand for more data from the front office, both more timely, more accurate data. And most asset managers have multiple providers, be it different custodians, different service providers and administrators. And the front office is really looking for that data to be consolidated into a single place, so they can feed into those front office portfolio management systems or order management systems, risk, and provide them that near-real-time view of their investments.
That demand for data has really encouraged the service providers to move that outsource horizon up and move into that middle office. And I think many asset managers who historically saw that operating model as a competitive advantage are now looking at how they can take standardized technology or services to support their front office and provide that enrichment of data through multiple sources and multiple integration points to really give them that single workflow back into their investment managers.
Murray Bender: What are some of the key challenges that asset managers face in maintaining an IBOR?
Ben Pumfrett: I think, really, there’s two parts to this, this answer. The first is that many asset managers are not using an IBOR, and they’re traditionally taking data from custodians or accountants, and creating that pseudo-IBOR. It’s not really the correct data set for what they’re trying to achieve. So, for example, taking end-of-day accounting data may give you the position, but for the next day the asset managers aren’t seeing the inclusion of the impacts of corporate actions or income for that day. They’re not seeing the intraday impacts of cash through collateral or through subscriptions and redemptions.
And then in terms of, actually, when you are looking at an IBOR, that challenge is really coming from, how do you get those multiple sources and systems to build that single IBOR view and make sure that that data’s accurate? So having controls around that data to be comfortable that that data that’s feeding the front office, that investment decisions being made are accurate.
The other is the timeliness, just as I mentioned before. How do we make sure that the front office has the data that helps enrich their investment decision process? So having the subscription and redemption data coming in intraday that allows them to make those investment decisions based on the latest information available. Not waiting till the next day until that data comes through an overnight batch or a NAV being produced.
The data control is really essential. And we’re seeing more and more focus on this, both from the clients and service providers, to make sure that data’s accurate and providing that oversight back to the asset manager to show the checks that are being performed and to give them comfort of that data.
The outsource IBOR is definitely enabling asset managers to make more informed decision through utilizing those standard integration and interfaces, where the service providers are investing into this area. All the technology firms, such as some of the RMSs, to have those integration points that allows that data flow to be much smoother and more timely to provide the front office that clear view.
Murray Bender: Finally, in your view, Ben, how will the Investment Book of Records continue to evolve in years to come?
Ben Pumfrett: I think, really, there’s a lot of speak in the market about that front-to-back model and that real-time integration between, you know, into the OMS (Order Management System) and performance systems from the service providers. And that’s definitely a route, I think, that we’ll continue to see taken by multiple parties in the market to allow, really, that flow from front to back and back to front in terms of giving the settlement information back into the front office informing the cash forecasting. And it’s really cash that we see a particular focus on in terms of that integration to allow that liquidity management to happen.
Through that part, you see APIs and standard integration between systems becoming much more prevalent. The partnerships or the acquisitions to allow that to happen has been commonplace for the last couple of years. So that IBOR is really critical into that integration because it is that middle ground that is providing that consolidation from the providers before it’s hitting that front office order management system or portfolio management system.
I think the other two points that we’ll continue to see evolve is that oversight model, as I mentioned earlier. The data control validation is key. And to have that transparent oversight model to the asset managers, so they’re able to work on a more efficient basis with exception-based processing, will develop further to allow the asset managers to feel comfortable in taking that data straight through into their front office. And actually that assists with that provision of that integration and that front-to-back model.
I suppose the last point is once you have comfort in the data, it’s really that data insights to help with that decision-making. So IBOR data being able to be used to proactively trigger operational processes, or action. So using cash forecasting and historic settlement rates with brokers to provide direction in terms of potential fails or liquidity management. Also, identifying where there are potentially overdrafts and FX triggered automatically using that data.
Murray Bender: Thanks for providing us with a better understanding of IBOR, Ben. We really appreciate your time.
Ben Pumfrett: Thank you for the opportunity, Murray, and good to speak to you today.
Murray Bender: Today’s podcast has been brought to you by RBC Investor & Treasury Services. We hope you found it useful. For additional insights on topics relevant to the financial services community, including our previous podcasts, visit rbcits.com/insights.
I’m Murray Bender. Thanks for listening.
This content is provided for general information and does not constitute financial, tax, legal, or accounting advice, and should not be relied upon in that regard. Neither RBC Investor & Treasury Services nor its affiliates accepts any liability for loss or damage arising from use of the information in this podcast.