The value of "one investment truth"

23/09/2021

The low-interest rate environment, increased market volatility and ongoing regulatory pressure are just some of the drivers forcing investment managers to review their target operating model today.

The Covid-19 crisis has accelerated this process and, while many firms are diversifying their portfolios with alternative / illiquid assets to find new sources of alpha, there is also an intensified need for a single, transparent, and integrated view of both public and private assets.  At the same time, investment strategies such as ESG1 and sustainable investing are becoming increasingly important to investment managers’ growth ambitions and need to be embedded into core operations to improve transparency.

In this challenging environment, where data consolidation is becoming increasingly complex, technology can act as a key enabler for buy-side firms looking to automate and scale for growth. However, many organisations still rely on disparate systems and fragmented IT architecture, leading to manual reconciliation processes and interfaces, which in turn increases their operational risks and costs. Data discrepancies can have a detrimental effect on valuations and calculations on a firm’s given risk analysis, and this becomes ever more complex in a remote working environment.

The answer to address these challenges is to achieve “one investment truth” across the whole organisation, front-to-back.

The concept of “one investment truth” delivered by an Investment Book of Record (“IBOR”)

Achieving one investment truth requires a robust foundation underpinning the operational infrastructure. The IBOR architecture is the best way to achieve this, providing centralised, real-time position keeping that covers all asset classes, in a multi-accounting framework that can support global operations.

With an IBOR at the helm of operations, disparate data from different sources is consolidated into one unified and seamless data layer that can be transformed into accurate and real-time information.

A “golden” copy of all investment critical information throughout the lifecycle of a trade is available across all portfolios and aggregated by security position, valuation, and cash holdings.

Operational simplicity and agility

By consolidating data on one platform, the IBOR simplifies the operating model, reduces complexity, and enables firms to decrease their operational risks and costs. Resources can in turn be reassigned to higher value tasks.

The automation of processes and streamlined workflows lead to improved straight-through-processing (STP) rates, offering firms faster time-to-market and the ability to respond more quickly to new opportunities for growth and competitive differentiation.   

The IBOR truly supports the daily business of asset managers and asset owners, as decisions across all departments are based on a single version of truth.

Smarter and more timely investment decisions   

To stay up to date with a fast paced and volatile market, portfolio managers need timely access to high quality data on their investment positions and accurate views of cash holdings. Not having a holistic view of positions and exposures is a major opportunity cost, as portfolio managers spend more time reconciling their start-of-day positions than analysing markets.

Access to trustworthy data enables them to make the best-informed investment decisions and to quickly adapt their investment strategies while complying with regulatory requirements. Agility in portfolio construction and optimisation is key to achieving alpha and meeting investment mandates.

Enhanced risk control

An integrated, real-time platform significantly improves risk management processes, as it provides a rapid overview of the total investment and liquidity risks across a firm’s portfolios. The IBOR provides a consolidated view of real-time valuations of portfolios as well as access to key ratios for insurance mandates.

Compliance, risk, and performance teams get more time analysing data, forecasting liquidity risks and cash holdings and spend less time managing data.

Compliance breaches and issues are more easily resolved, as the same data is shared by the various teams, looking at the same consistent and indisputable reality: “one investment truth”.

The foundation to scale for growth

By enabling investment and operations teams to focus on their core business and value-added tasks, CrossWise, which includes SimCorp’s leading IBOR, helps buy-side firms evolve and respond to market developments as and when they arise. This provides a true competitive advantage in today’s challenging environment and allows the operational resilience needed to sustain growth.

Marc Schröter, Head of Global Product Management, SimCorp explains “What sets the SimCorp solution apart is that it is one system, on one database, on one codebase. So, it natively provides a single source of truth. That means there are no integration points, no extracts, no refreshes. The data is in real time to optimise investment decision support”.

IBOR ENG

Sources:

  • 2021 SimCorp webinar: “Investment Portfolio Excellence: The conviction of one truth”

  • 2020 SimCorp White Paper: “New Reality, New Lessons”: How the sharp are sharpening their operating model

1Environmental, Social and Governance

Nicolas Goblot

Nicolas Goblot joined SimCorp in 2014. For the past 7 years, Nicolas has been involved in the development of the business in Europe. As a Value Advisory Architect, his role is to define the best Target Operating Model that will support the growth of SimCorp clients.

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