This article is co-authored by Kristoffer Fürst, CEO of Limina and Doctor Ian Hunt, independent consultant and IBOR expert. Our goal with this article is to compare Limina’s Investment Book of Record against the IBOR Global Standard from 2014.
Part of why we started Limina back in 2014 was our recognition of the challenges in trusting and accessing position data. Hence, Limina’s Investment Management System has a core which is a live extract Investment Book of Record. As former investment managers, we want to present a coherent business-level view of the topic: we’ve found this difficult to access to date. Hence, we created a complete guide on Investment Book of Record. This article you’re reading now is an extension of that guide, which transparently compares Limina’s capabilities with those of the IBOR Global Standard.
The benchmark: 2014 Investment Book of Record Global Standard Report
In 2014, a consortium of investment managers known as the Global IBOR Standards Working Group, released a paper that defined the 3rd generation of Investment Books of Record. This generation of IBOR has become known as “live extract” IBORs, because it’s not dependent on storing positions in any way, but rather always constructs and delivers a position on request. This position view extracted is based on a time-series of transactions in multiple states, viewed through a lens which is defined by instructions from a user or other system.
The IBOR Standards Working Group consisted of firms such as The Vanguard Group, Ontario Teachers, M&G Investment Management, JPMorgan Asset Management, Jupiter Asset Management, LGIM and others.
The 2014 IBOR Global Standard report was created by potential users of a generation 3 IBOR, with a clear focus on the problems that a live extract IBOR should solve. In other words, the paper outlines what the working group members, as buyers of IBOR solutions, wanted from a position management system. In essence, they wanted to increase confidence in data across internal functions, including but not limited to the Front Office, to improve investment decision-making and reduce operational risk.
This was a gift of transparency to software vendors. Vendors could now see clearly what investment managers wanted and why. Unfortunately, vendors haven’t returned the favour and haven’t been transparent in return.
Instead of measuring themselves objectively against the IBOR Global Standard, a marketing race began, with vendors queueing up to claim that they delivered an Investment Book of Record. While technically true, many vendors had a generation 1 (“flush & fill”) or generation 2 (“rolling balance”) IBOR. This was confusing to buyers of the software. In reality, Investment Book of Records itself wasn’t new, but the 3rd generation design was. Hence, for buyers procuring an IBOR system, it’s important to figure out which generation of IBOR you’re being sold by a vendor.
Limina IBOR vs Investment Book of Record Global Standard
At Limina, we seek to distinguish ourselves by being transparent to the market, and our reputation supports this. To underpin that reputation in the context of IBOR, we’ve created this article. It goes through the requirements of a generation 3 live extract IBOR, and explains how the Limina IBOR compares to the IBOR Global Standard. We’ve also created a template RFI which you can use if you’re procuring a solution that has IBOR as one of its components.
To aid with transparency, this comparison has been externally validated by one of the co-authors of the original IBOR Global Standard paper and a member of the IBOR Standards Working Group: Dr Ian Hunt.
The Limina Investment Management System is built with a live extract Investment Book of Record at its core. It’s no coincidence that our company was founded the same year that the standard was released, 2014. On top of the IBOR, we’ve built Front and Middle Office workflows and capabilities, which directly leverage the IBOR.
Investment Book of Record capabilities compared
This section summarises the 24 high-level capabilities of an IBOR according to the IBOR Global Standard, compared against what Limina’s IBOR is capable of. The requirements are categorised into "core" (necessary for any IBOR) and "frontier" (functionality that might live as part of an IBOR product, or separately in another system).
Core IBOR Capabilities versus Limina IBOR
The primary purpose of an Investment Book of Record is to deliver high-quality position data. This means complete, accurate and timely (past, real-time and projected) assets, contracts, and cash.
An Investment Book of Record should not only be able to deliver high-quality portfolio data but also highlight when/if positions might not be complete, accurate or timely. To this purpose, here are the key capabilities of an IBOR compared to Limina’s capabilities:
|Capability||Limina IBOR Coverage|
|Flexible definition of position views and the extraction of position data||Fully supported.
The user can request position views with state filter for times in the past, live or in the future.
|Project and capture events which impact positions||Fully supported.
Limina capture all events from their first state. Our IBOR projects not only cash, but also exposures and asset positions into the future.
|Measure and manage the quality of event and position data||Fully supported.
Limina’s IBOR has an embedded data quality control application that allows users to configure automatic checks for data quality, which is continuously built out for more types of data quality checks.
|Maintain and adjust event data as required, e.g. manual input or back-dated corrections||Fully supported.
All transactions and their history of changes is stored.
|Source and/or maintain reference data that is exclusive to IBOR||Fully supported.
Limina IBOR supports multiple different ways to connect data at the discretion of clients.
Limina’s IBOR supports all position states defined by the IBOR Standard and one more (“working”, which for a trade order means in market but not yet executed).
Frontier IBOR Capabilities vs Limina IBOR
Frontier Investment Book of Record capabilities are those that aren’t necessarily internal to an IBOR, but are natural for an IBOR system to offer on top of basic transaction maintenance and position extraction. For example, this may be for efficiency purposes, or because the current system landscape makes the IBOR a natural location for additional services and enrichments.
|Capability||Limina IBOR Coverage|
|Aggregation and grouping of positions||Fully supported|
|Pricing / valuation for asset positions||Fully supported|
|Model-based valuation for contract positions||Fully supported via 3rd party sources*|
|Rate conversion for cash positions||Fully supported|
|Constituent look-through for fund, index and basket positions||Partially supported. Full support in development, independent on 3rd party sources which might not always be complete, accurate and/or timely|
|Analytics, especially for fixed income and derivative positions||Fully supported via 3rd party sources*|
|Exposure grouping for all position types||Fully supported|
|Messaging, to manage the flow of event messages inbound to IBOR||Fully supported|
|Reference data integration, to deliver external reference data to IBOR||Fully supported|
|Downstream integration, to deliver the IBOR position data to consuming applications||Fully supported|
|Data access mechanisms, e.g. a position data warehouse to persist IBOR position data extracts, or continuously updated operational data store for real-time positions||Fully supported|
|Notification, to deliver IBOR-generated alerts to their target recipients||Fully supported|
|Reconciliations matching, to maintain alignment between IBOR position data and position data maintained by other systems and services||Fully supported|
|Book cost computations||Partially supported|
|Positional P&L computation||Fully supported|
|Commissions and charges computation||Fully supported|
|Transactional tax computation||Fully supported|
|Support for liability events / positions alongside assets||Partially supported|
|The provision of event data to consuming systems alongside position data||Fully supported, assuming consuming systems’ ability to consume the data|
* Limina has not built analytics models on purpose, but rather relies on integrations to the analytics and valuations source(s) of choice to ensure your portfolio is consistent across systems
Detailed benchmarking to the IBOR Standard
In this section, we deep-dive into the 6 categories of requirements outlined by the 2014 Global IBOR Standard. For each category, we summarise:
- What type of requirements the category outlines
- The number of core vs frontier requirements in each category respectively
- Why this category is important to buyers of IBOR
There are 131 requirements in total, which we don’t list below but you can access them in our free IBOR RFI procurement template.
1. Scope and Coverage of Investment Book of Record
This category is focused on completeness and is broken down into 10 specific requirements, which are fully detailed in our IBOR RFI.
It mandates that a generation 3 IBOR must track all instrument types and all events (including cash), and not rely on accounting as a safety net. It also specifies the need to correctly represent legal entity hierarchies, e.g. fund structures and internal strategies.
With this complete representation, an IBOR becomes the ultimate data source for any decision-making or reconciliation that is based on how portfolios looked, look, or will look in the future. It goes without saying that it’s easier to make decisions based on complete data vs incomplete data.
2. Position Data Quality Objectives
Position Data Quality Objectives expand on the completeness demand from the previous category, and mandate that complete data should be available in all places where it’s needed, and at the time that it is needed. For example;
- Injections being available when a pre-trade cash ladder compliance rule is run; or
- An anticipated option exercise in two days included in market exposure planning views
This category is broken down into 11 specific requirements in the IBOR RFI.
3. Position Data Quality Management
It’s one thing to make sure that all data can be reflected accurately and in a timely fashion, the next step is to have controls to make sure that this is, in fact, the case. i.e. data quality control checks that expected data has arrived, that it’s within predefined tolerances, and that the new data is screened properly.
This requirement also includes reconciliation and audited adjustments of data, to ensure integrity of position data as far as is practically possible. For example, if the IBOR knows of a dividend months in advance, then it’s in a prime position to reconcile against custody that the dividend was settled on the right date. This then enables the IBOR to screen for patterns in exceptions, e.g. to identify that a certain custodian systematically being late with a certain type of settlement.
There are 32 specific requirements when looking at Position Data Quality Management and these are documented in our IBOR RFI template.
4. Definition and Delivery of Position Data Extracts
Once all the prerequisites that need to be in place have been done, in terms of the management of the underlying position drivers, it’s now possible to actually start building the positions based on trade orders, cash events, etc. An IBOR will create a position view based on any extract specification, defining the lens to apply to the underlying transactions, e.g. including open orders for portfolio managers doing a rebalance, but excluding them for reconciliation of positions against fund administration. There are many current use cases of a live extract IBOR.
Beyond current use cases, the live extract IBOR can support use cases unknown today. As with Google, until a facility exists, then people don’t demand it, because they don’t see what they could do with it. Once it’s there then it becomes invaluable. Restricted capability leads to restricted ambition. The live extract IBOR frees us from restriction and open up for new questions to be asked.
Once positions views are built, then they need to be delivered to the user, which can be an actual user in a user interface or to a separate, requesting system. Frontier functionality here includes aggregation of positions and cash as well as adding more analytics such as valuation, look-through and exposures.
5. Value-Add Services
Additional capabilities that could be offered by an IBOR as value-add services include book costs and P&L calculations, as well as full support for the calculation of commissions and taxes. This is useful as part of the IBOR because it means that even in simulation state, a portfolio manager can see potential cash impact on his/her portfolio, including commissions and taxes, i.e. it contributes to the satisfaction of the requirement for completeness. The 5 specific requirements for this category can be found in our IBOR RFI template.
6. Administration, Performance and Scalability
The IBOR should support a full range of manual interactions/overrides to data from external systems. It should also automate as much as possible and support the restructuring of portfolios/funds. This requirement links back to the three data quality requirements: under no circumstances should the IBOR be forced into a state where it’s not complete, not accurate and/or not timely. Even if data coming into the IBOR is incorrect, the IBOR should have capabilities to allow for amendment of that data as effortlessly as possible. There are 25 specific requirements related to administration, performance and scalability all of which are documented in our IBOR RFI.
Summary of our IBOR comparison vs IBOS Global Standard
We hope that this comparison has been useful to understand how the Limina IBOR system compares to the original Global IBOR Standard.
If you wish to read more about IBOR, we’ve created a complete guide to Investment Book of Record which includes multiple articles.
We also encourage you to check out the IBOR RFI template and incorporate these questions into your next RFI. You can also directly check out our list of vendors currently known to be delivering a generation 3 IBOR.
If you'd like to find out more about Limina's IBOR and see it in action, why not book a no-obligation demo with us?