IBOR: a necessary step towards a comprehensive investment platform

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1 IBOR Solution insight IBOR: a necessary step towards a comprehensive investment platform Take ownership of your record of trades and assets adding business components where you need them

2 A strategic solution that delivers transparency and operational efficiency firm-wide How do you meet the needs of the front office and deliver consistent positions for accounting, custody and performance reporting, across all asset classes and trades types?

3 IBOR: an opportunity to streamline All investment managers and asset owners should maintain accurate position data for effective portfolio management, compliance, performance measurement, accounting and reporting. The Investment Book of Record (IBOR) ensures that consistency is maintained across these functions to facilitate informed decision making firm-wide. This consistency is most easily achieved with an integrated system, which supports additional business components. Therefore, while the primary focus of an IBOR is on position management, a robust IBOR must address essential business requirements within the organisation: Real time and accurate: Many approaches to IBOR rely on back-office systems, which may not be real time, and the implementation of IBOR often requires data consolidation across multiple systems. These consolidation processes introduce data latency and are often not even fully automated, which introduces inaccuracy and errors. Across multiple asset classes: To implement a successful IBOR, firms need to deliver high quality, timely position data across all asset classes. At a basic level, that is an inventory of assets, contracts and cash. The majority of investment firms trade multi-asset using several order and execution management systems. As a result, a lot of firms struggle to establish a single version of the truth. Flexible for the future: Implementing a successful IBOR solution is a strategic initiative that requires flexibility to meet evolving business needs. For example, a firm may want to on-board new types of debt securities, they may have to trade a new derivative or meet new regulatory requirements. The IBOR is the data backbone that will have to support these changes. Misys FusionInvest IBOR 3

4 The search for transparency Today s asset managers are under great pressure to increase analytical transparency in the front office, while maintaining data integrity across the organisation. IBOR has become a pervasive initiative throughout the buy-side as firms strive for transparency and a single version of the truth. The needs of portfolio management, trading, post-trade/middle office, investment operations and accounting are diverse, and each will require position data with a status and a timing that suits their varied perspectives. A consolidated view Achieving an accurate, consolidated view can be challenging as each department has its own data requirements and priorities. For example, accounting focuses on end-of-day positions, while portfolio managers require start of day information, including corporate actions and transactions. The IBOR is capable of providing consistent and consolidated views with different flavours depending on market data sources, valuation models and trade statuses. A strategic issue Vendors have frequently regarded IBOR as a systems integration or plumbing issue that seeks to aggregate data from different sources. The reality is that most firms have multiple information stacks, multiple accounting systems and some even have several order management systems. A growing number of buy-side firms are addressing IBOR as a strategic opportunity to reduce the number of systems they manage. 40 % 35 % 75 % Reduce time spent on trade validations and improve productivity by 40% * Realise a 35% improvement in the working time of traders * Reduce time spent on internal development resulting in cost savings up to 75% * A real-time data backbone Numerous investment firms have attempted to build IBOR solutions by connecting existing solutions. However, it can often be difficult to obtain real-time and accurate data with this approach. For example, many systems do not address the gaps regarding derivatives; others still rely on data from the back office. Therefore, a large majority of IBORs that are configured this way usually result in unreliable interfaces and fail to deliver data on time. The bigger picture At its core, IBOR is an inventory of assets, contracts and cash. But IBOR as the central position manager must provide the tools to manage position data quality and to highlight when quality or timeliness is questionable. A successful IBOR must offer a flexible definition of positions views and the extraction of position data. The IBOR should enable streamlining of data flows and allow the front and middle office to gain access to this data. In simple terms, IBOR is the beating heart of a systems environment that drives all the supporting business processes. Supporting growth Many investment managers consider IBOR as an operational challenge that is a time consuming cost of doing business. However, an IBOR can unlock the true potential of a firm by supporting growth, whether that is scaling up the business or adding new investment strategies to achieve better returns * Based on ROI analysis carried out by the Misys Customer Value Team 4 Misys FusionInvest IBOR

5 Misys FusionInvest: a fully integrated multi-asset trading system built with a reliable IBOR at its core FusionInvest enables investment managers to adopt a strategic approach to IBOR. The system provides a real-time data backbone that enables the benefits of consolidation and real-time, intraday data. The core of FusionInvest is an IBOR that drives modular components for the front, middle and back office. Modular by design The modular design of the system enables individual components to be switched on or off as required. FusionInvest helps organisations implement a cost-effective IBOR and realise a positive return on investment. Beyond efficiency Based on a robust IBOR, FusionInvest facilitates a best-of-breed approach to investment management that boosts efficiency and reduces costs. FusionInvest covers the complete investment process from pre-trade through to fund administration, encompassing portfolio and risk management, analytics, compliance and investment operations all in a single system. The best of both worlds FusionInvest was designed from the outset as a native IBOR solution, with a position-based approach specifically designed to provide real-time visibility across investment data. Moreover, it provides consolidated position views from a trade-based record, with its origins in the sell side, where this is a fundamental requirement. The system separates instruments (listed or contracts) from transactions so it is uniquely suited for the shift towards standardisation and securitisation of OTC contracts. A single version of the truth The principle of our system is to have a single version of the truth based on trades and events, which is available in real time. The can be displayed and reported as a portfolio/strategy view, accounting view, or a custody view. Because each trade or event is represented as a single event in the database, FusionInvest maintains data consistency throughout the organisation there is no need to maintain duplicated data sets. A platform for growth The IBOR is the real-time backbone of FusionInvest that drives all the other business components, including portfolio and risk management. With its modular approach, FusionInvest helps firms to immediately align their technology with their business strategy. New functionality and asset class coverage can then be added as required to meet emerging business needs. Multi-asset support FusionInvest can accommodate virtually all listed securities and OTC instruments and has the flexibility to support new types of derivatives and other asset classes. Highly sophisticated pricing engines and risk models support an expanding universe of product coverage. Misys FusionInvest IBOR 5

6 A single solution to multiple challenges There is a wide range of events that drive business processes and systems need to be able to accommodate changes and increasing complexity. Full automation from a single solution Building an IBOR is no trivial exercise for many buy-side firms. Although the operational and business benefits are attractive, the costs and risks are high and there is no promise of strategic benefits. FusionInvest begins with an IBOR and facilitates multiple business workflows by incorporating straight-through processing (STP) and automated life cycle management. In this way, FusionInvest can serve a variety of companywide requirements, while improving operational efficiency. Supporting profitable growth More than 90 buy-side institutions rely on FusionInvest to make them more productive and agile. Because the system is built around a reliable IBOR, it becomes easier to extend services and to support new geographies, regulations and market practices. This allows an organisation to expand its range of products and services without increasing operational overhead. Meet compressed reporting cycles As the velocity of business increases, reporting cycles become compressed. There is a general need for more intraday and real-time data. This poses a challenge to systems architecture, particularly where there is a reliance on accounting systems for position data. In parallel, there is a need to support a growing array of complex instruments. By choosing FusionInvest, firms can reduce the number of systems by supporting all asset types, including complex derivatives in a single platform. Answer the challenges of increasing regulation As regulatory requirements evolve, the need for an IBOR becomes critical to support the need for enterprise-wide risk measures, sophisticated analytics, cross-asset compliance and reporting. With FusionInvest, firms can ensure they address all these challenges now and in the future. 6 Misys FusionInvest IBOR

7 Success story: Assénagon Smart alternative business built on a single platform. We consider Misys FusionInvest to be our core trade-capture and positionkeeping system. It is our golden source of data. Robert Wendt Head of Investment Solutions Assénagon Rich functionality in one platform The business has been built entirely on FusionInvest, chosen for its reliability, breadth of coverage, and integrated design. New modules have been deployed to meet evolving business needs, aligning costs with success. With Misys FusionInvest, we can run all of our funds from one software platform, explains Robert Wendt, Head of Investment Solutions at Assénagon. We are trading in interest rates, equities and credits without having to use a second off-the-shelf platform either in the front or back office. Not only does this make it simple for us to launch new trading products, we also get the added safety, security and cost-efficiency benefits of straightthrough processing. Enabling growth in adversity For Assénagon, the project with Misys FusionInvest has been successful for two main reasons. The first is that the platform is able to support the varied and sophisticated activities undertaken by Assénagon, including cross-asset trading and the maintenance of multiple positions against the full range of ETFs they trade. The second is that FusionInvest helps Assénagon to fulfil regulatory compliance requirements and new legislation as it is introduced; for example, UCITS. We consider Misys FusionInvest to be our core trade-capture and position-keeping system. It is our golden source of data. This allows us to reduce the cost of compliance by quickly generating new, accurate reports to support changing business requirements. Misys FusionInvest has helped Assénagon to thrive against the background of a major global recession. I think having a stable and adaptable IT platform like Misys FusionInvest really helped us capture the change in the market and come out as a stronger company, says Robert Wendt. Because FusionInvest is such a strong, flexible and agile solution, we can steer our business without any restrictions from our IT platform.

8 About Misys Misys is at the forefront of the financial software industry, providing the broadest portfolio of banking, capital markets, investment management and risk solutions available on the market. With more than 2,000 customers in 130 countries our team of domain experts, combined with our partner eco-system, have an unparalleled ability to address industry requirements at both a global and local level. We connect systems, collect data and create intelligent information to drive smarter business decisions. To learn more about how our Fusion software portfolio can deliver a holistic view of your operations, and help you to solve your most complex challenges, please visit misys.com and follow on Twitter. Corporate headquarters One Kingdom Street Paddington London W2 6B United Kingdom T Misys and the Misys globe mark are trade marks of the Misys group companies Misys. All rights reserved / 0414