Over the past twelve months, the conversations we have had with clients and prospects at Suisse TechPartners have indicated that functional needs are strongly converging for all types of companies managing assets from a sovereign wealth fund to a single family office or a trustee bank.
The surge of new regulation like for ESG, the need to foster the quality of service delivered to the end client and the will to move to a digital solution push firms to look for alternative technical solutions to move away from obsolete and / or non-adapted technology.
In essence, the cornerstone of the needs is obviously the capacity to collect, cleanse, aggregate and report on data coming from multiple sources and showing a fast growing degree of complexity.
This is very true for Asset Owners like Insurance Companies or Sovereign Wealth Funds or even Wealth managers who outsource the management and the custody of their assets to external institutions and who face significant difficulties to consolidate all their assets including non-custodial ones to report back and analyze performance and risk.
This is true as well for an asset manager and an asset servicer who acts as trustee and / or fund administrator and who needs to combine a wide variety of assets and to monitor complex investment compliance or ESG rules.
All these firms face the need to swiftly adapt to new requirements coming from their end client / owner or from the regulators while moving away from their aging architecture to reduce costs and deliver servicing commitments.
Ultimately, all actors of the asset value chain face the same needs:
- Manage the growing diversity of investible assets
- Reconcile and clean data from multiple sources
- Aggregate data to build a consolidated view of assets
- Analyze and report to the interested parties
- And they face the same constraints and barriers
- Most IT platforms are ageing and conversion is a lengthy process
- Need of multiple platforms to manage end to end processes
- Lack of consistency of data received from service providers
- Need to implement in a swifter way massive changes
- Increasing obligation of controlling delegated functions
- The multiplicity of solutions and the complexity to find the appropriate one to plug
- Need to monitor costs
This is where the new technology platforms – including our own PMplus® – launched and mostly developed by financial technology (Fintech) firms do offer efficient solutions to meet these requirements and face most of these challenges.
The combination of recent technology components (programming languages, reporting component, web services, cloud services , Artificial intelligence,…. ) allow to develop, in an agile way, solutions which are functionally rich and easier to deploy with a modular approach if need be.
The following diagram shows the functional design of such platforms in which the nucleus is the Investment Book of Records (IBOR) which captures all transactions and positions for a given portfolio / investment structure.
The purpose of building the IBOR is many fold:
- Build a consolidated view of assets based on an efficient acquisition of data from multiple sources
- Reconcile several sources when need be to ensure the consistency of the position build
- Repair positions not matching in connection with the source(s) of data used
- Enrich positions with data not provided by external sources and required for subsequent processing
Once the IBOR positions are confirmed, they can be used for multiple usage like compliance monitoring or performance analysis in a consistent manner as the information used is the same for all calculations and reports.
The logic of the IBOR sounds attractive and there are numerous platforms on the market claiming to deliver the described functions with very fancy demo scripts. Therefore, it is essential to check the way data are reconciled and cleansed as most “aggregators” do build positions based on information received from external sources and report back on what they have integrated which can end up with a “garbage in / garbage out result”.
Before performing any fancy calculation or reporting, the most crucial output is reconciled and accurate data. To do so, the best way is to rebuild the position based on individual transactions which can be integrated at any stage after the execution / confirmation level. Then, the positions can be reconciled with external sources such as the Asset Management Middle Office, the Custodian and /or the Fund administrator.
As soon as the positions are build, they can be used for multiple functions. In the case, these functions are part of the same platform, all outputs are going to be consistent by construction.
Some could say that the concept of IBOR has been around for a while and this is right. The difference is that today new technology components allow newly developed platforms much more powerful and agile in their capacity to develop new functions, interface with new counterparties or provide enhance and user definable reporting. These elements are critical to optimize the implementation process.
The second important element is that most players have to cover the same investible universe composed of custodial and non- custodial assets. The main differentiating factor among them is the budget available to build an IBOR solution. This is where platforms being cloud based, offering Saas mode and furthermore a multitenant capability do allow to find affordable solutions for most types of budget.
We would be delighted at SuisseTechPartners to further discuss these subjects with you and see how we could support your company in adapting its technology architecture in a fast evolving environment