Access to data is becoming ever more important. That is why asset owners and asset managers are now using data warehouses for storing holdings and market data, among others. This allows them quick and easy access, and ensures that the same data is used across the entire organization, enhancing consistency. Yet there are still questions about which data should be stored, and discussions about how to choose the right data for specific analyses can be difficult. Our Investment Performance Solution can provide a helping hand.

Building a Performance Book of Records

The Investment Book of Records (IBOR) and Accounting Book of Records (ABOR) serves the front and back offices respectively. Both have been adopted on a large scale. One of the dominant discussions has been on which of these sources to store and as a consequence run the performance evaluation process. The ABOR gives access to stable and accurate data which is reconciled on a frequent basis, typically what a performance team is looking for. On the other hand, due to the many checks and balances the data is often lagging and does not fully reflect the actual investment process. This is where the IBOR comes into play, which does reflect the actual investment process and gives an almost instant reflection of the current positions but however lacks the robustness of ABOR data. Often both are stored and are used for different parts of the performance evaluation process. The ABOR is used for the official return calculations where the IBOR is used for the in-depth performance attribution analyses.

 

We think the middle office should strive to combine the best of both worlds and take a step further to create a Performance Book of Records (PBOR). The PBOR links the official ABOR and up-to-date IBOR and enhances those with measures critical for performance measurement like cash-backing for derivatives and look-through relations. This gives the middle office the flexibility to select the best source for any type of analysis and keep control of the performance process as a whole. For larger asset management firms and asset owners in particular, who have to deal with various asset classes and portfolio managers only reverting to the ABOR or IBOR won’t cut it as the requirements will vary in terms of frequency and timing for various portfolios. We see a clear case for a Performance Book of Records which is managed by the middle office. It allows for controlling the quality of inputs (e.g. most recent or audited), the analysis and efficient distribution across the organization. The implementation can also be relatively straight forward for instance, our Performance Measurement, Attribution, Ex-Post Risk and GIPS composites platform PEARL includes the tooling to create one off-the-shelf, and is in use by many asset owners and asset managers across the globe.

If you want to find out more about how we support this in our solution, please have a look at www.pearl8.com.

Contact

Maurits van Joolingen
Senior Lead Consultant
+31 20 700 97 52
Bas Leerink
Team Leader Client Servicing
+31 20 700 97 24

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