Complete Investment Control: An Investment perspective to reporting



The benefits of having an Internal Book of Records (IBOR) to complement custodians’ activities are clear:


There is a direct link between portfolio performance and internal operational and informational quality – having an internal system forces internal efficiencies and reduces weak informational flows.

Weak (or incomplete) information flows, stem from “Information Latency”, i.e. the inability of people and systems to aggregate, analyse and act on portfolio data holistically in a timely manner.

These efficiencies not only cut costs by up to 35% but surprisingly also generate 50-250bps per annum of additional performance when comparing investment managers with internal systems, versus those without internal systems (Custodian or Administrator reporting only).


A robust internal control framework– there are a number of examples where families have unnecessarily lost a significant portion of their wealth in the absence of effective reporting controls.


The Investment perspective to reporting – to look to the future – there is a need to think more clearly in the present.

So what options do Family Offices have in order to preserve wealth and  beat their investment benchmarks?

Perhaps looking inward at the quality of their investment operations is a long-overdue alternative.

Can your Family Office compete against professional money managers?

Family Offices are increasingly benchmarked against professional investment managers for operational quality and investment performance. When portfolio managers review their investment operations and implement robust systems and processes, they routinely discover inefficiencies that create operational and informational friction, which in turn reduce portfolio returns.

But, how does operational efficiency contribute directly to portfolio performance?

The direct link between portfolio performance and operational quality until recently has been difficult to quantify. Organisations with in-house operations and integrated system strategies generally only have one book of records, so there is no need for a separate investment book of records. On the other hand, Family Offices, typically with outsourced operations (investment, custody, valuations or accounting) typically do not have one place from which to obtain a fully consolidated overview. They would therefore would benefit from having an internal book of records (IBOR).

The presence of a robust internal book of records (IBOR) eliminates weak information flows and operational inefficiencies and directly contributes anywhere from 50 to 250 basis points (bps) in realized portfolio performance per annum.

Rigorous Research — Real-World Results

An empirical study by Citi Group Custodian Services (2012) analysed 138 portfolios, ranging in size from $250m to $1.1bn. Asset classes included equities [~65%], fixed income [~15%] and listed derivatives. Geographies covered were global (developed [~80%] and emerging), and all sectors were represented, including alternatives. Strategies spanned long-only and long/short. Returns were tracked across extremes of market cycles — both bear (2000–2002) and bull (1999-2000; 2003 – 2006).


The benefits of having an internal book of records (IBOR) to complement to the custodians activities are clear:

  • The investment managers experienced a 50- to 250-basis- point improvement in risk-adjusted performance (annualized) for the underlying portfolios that were directly affected by the investment manager’s operations initiatives.

  • Analytics & Compliance were the main

  • Effects were visible generally within six to nine months of project initiation.

Categorising the various projects into functional initiatives highlights the performance range of improvement for each category.

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