Part 1: Unlocking Investment Agility: Why an IBOR-Centric Architecture Matters

Series: IBOR – The Investment Nervous System | Part 1 of 2

Senior Consultants Laurence Beine and Ashen Khosa

In today’s markets, agility isn’t a buzzword – it’s survival. Investment managers need fast, confident, and accurate decision-making to stay ahead. At the heart of that capability? A real-time view of your position data. Enter the IBOR-centric architecture.

This two-part series explores how an Investment Book of Record (IBOR) can become the heartbeat of your operations giving you a competitive edge through clean, reliable, on-demand data. In Part 1, we explore why this architecture matters and the tangible benefits it unlocks…

An IBOR-centric architecture

Agility in sport is defined as “a rapid whole-body movement with change of velocity or direction in response to a stimulus“. Just as athletes, players in the financial markets need to react accurately, confidently and timely to changes in their environment. This requires full knowledge and understanding of their current position to plan the next move. Position data is the most critical unit of information representing the current position in the financial markets.

The agility of an investment management firm will depend on the availability of complete, accurate and timely position information across all the functions required to compete in the financial markets. The data captured by functions like middle office or data teams needs to be processed and aggregated without delay and made available to position data consumers like front-office. A real IBOR (Investment Book Of Records) is one that can act as an athlete’s nervous system capturing piecemeal data, aggregating it into actionable information and providing it how, where and when it is required.

This paper advocates that having such an IBOR at the core of an investment manager’s technology architecture, while not sufficient, will enable them to compete in the top league of their industry. It will start with discussing IBOR as the unique source for position data, then provide examples of how agile an investment manager becomes if it has a real IBOR at the core of its infrastructure.

Why Position Data Matters

Position data is the main input of most processes executed by any investment manager. Be it to model a portfolio and decide what trades are required to align it with target exposure, check that a trade complies with portfolio restrictions, manage collateral, process corporate actions, measure performance, control risk, report to clients, reconcile with accounting and/or custodian… all these processes and others require position data in one form or another.

Investment managers have addressed the challenge of supplying the various processes with position data with status and timing that fills their requirements in different ways. Some asset managers still rely on accounting data which they adjust for missing transactions. Some have an in-house position keeping system that dispatches positions in batches, usually at the start of the day. Some rely on an IBOR (Investment Book Of Records) but even that, while sounding promising, does not tell the whole story. Indeed, a lot of offerings claim to be IBOR despite different levels of capability.

While there is no fully agreed definition of an IBOR, the IBOR standards working group defines its focus as providing complete, accurate and timely positions customized to satisfy the needs of consuming users and applications. Consumers of position data have different needs as to what status transactions need to have reached before they are included in their position data set. The working group lists the following position data sets as standard requirements:

• Forecasts / estimated views
• Traded / committed views
• Contractual / accounting views
• Physical / custodial / settled views
• Looked-through views, and
• Historical views.

The promise of the benefits of IBOR has contributed to the appeal of integrated front and middle office Software as a Service (Saas) offerings the last years. This followed a period where selecting and integrating best of breed systems for each function resulted in a legacy of spaghetti infrastructures that were costly, difficult to evolve, and data was decentralized. The resulting poor data quality often undermined users’ trust in the systems encouraging them to maintain their own sets of position data, especially to deal with concerns around cash.

IBOR as the Central Nervous System

This paper advocates for a next generation technology architecture where an IBOR acts as the nervous system of the investment management company, serving and coordinating all its functions. The IBOR acts as a middleware that collects transactions and data from all transaction and data generating processes, and computes, enriches and supplies constantly up to date critical position data to all applications/processes on request.

Just like the athlete’s foot will only receive instructions from the nervous system, if an IBOR has been successfully implemented, it will be the single source of position data for the whole company, there will be one single position calculation engine in the company. We can call this an IBOR-centric architecture because there is truly one single golden source for position data in the whole company. Anyone who would search for position data outside of the IBOR would not find any.

The position data sets supplied by the IBOR to various functions/processes will be different as they include transactions at various stages of the transaction life cycle or granularity and are enriched with different reference data but they will be consistent.

Middle office, reconciliation and trade processing teams enrich the same position data set as front office relies on. Intraday changes like corrections, changes in collateral, corporate actions, resolution of reconciliation breaches performed by these teams are available real time for front office and all other functions. Position data can also be requested “as of” or “as at” some point in time in the past. The organisation has complete clarity on its positions at each stage of the transaction life cycle and at each point in time. It can react to any event or answer any request confidently, efficiently and timely.

A World of Opportunities

Imagine that your company’s IBOR is able to provide position data according to your exact specifications in terms of scope of portfolios and transactions to be included, data enrichments, level of granularity… instantaneously upon request. Developing a tool to support a unique investment process would just require a user interface and a dedicated calculation engine, embedding the uniqueness of the investment process.

The tool would request and receive from IBOR a reliable and up to date set of position data that it would use as input for modelling calculations. If, as part of the trade generation process, the portfolio manager wanted to check the impact on risk as measured by the risk team, the tool would just send the simulated trades to the IBOR and instruct it to send the new simulated positions to the risk tool with the same data set as used by the risk team. No duplication of position calculations, the ability to see the risk numbers as the risk team will see them post-trade before validating the trade for execution, without manual intervention or dual input of trades. This set up would also enable the portfolio managers to leverage on the company risk management platform for desk specific models or measures rather than develop on desk tools.

Other examples of benefits and possibilities an IBOR-centric infrastructure brings to life are:

• Since there is one set of positions only to maintain, there is also one reconciliation only with custodian and accountant. All reconciliation efforts can be concentrated on one position data set, resulting in better quality of position data.
• The availability of real time customized position data simplifies the development of robust on desk applications or internal systems to support differentiating investment processes that create a competitive advantage.
• Transactions executed in management delegation arrangements or by custodian can be ingested, aggregated and dispatched in real time, enabling close control and unified management approach.
• The IBOR being like a middleware centralizes and coordinates all functions/processes and allows outsourcing of specific functions like trade execution or transaction processing while keeping data timely.
• Include risk analysis in the investment decision process using the same risk model/engine as post-trade risk analysis.
• With strong control over data integration in the core processes, the investment manager can define a unified data strategy for the organisation and align it with their business strategy.
• On desk data scientists, quants and client account managers can easily access position data sets calculated on demand with specific enrichments, status and times. They can also simulate backdated transactions and positions to back test quantitative investment models.
• Transaction status management enables calculation of portfolio shadow NAV in IBOR.
• A robust architecture with an open IBOR at its core is scalable, it will support organic business growth and enable swift integration of new investment desks in case of merger.

These and other possibilities an IBOR-centric architecture brings to life mean true agility. The investment manage can react to events in full knowledge of their current position because all functions have all the available information that is relevant to them at any point in time. By letting investment desks leverage the central infrastructure, it enables the implementation of more complex and differentiated investment processes without adding delays in the decision-making process nor requiring extensive on desk dedicated data bases.

Need clarity on whether your IBOR is really delivering?

At Liqueo, we’ve helped leading asset managers review and rebuild their data architecture around a real IBOR model, improving agility, reducing duplication, and supporting competitive strategies.

If you’re rethinking how position data flows through your business, our team can help you cut through complexity and identify the right model for your needs.

In Part 2, we explore how to scope, design and implement an IBOR-centric model aligned to your unique investment strategy.