Unlocking the Secrets of the ‘Data Vault’

Posted: July 9th, 2022 | Author:

For institutional investors, data are the bedrock of their investment programs, and they need completely accurate and up-to-date information about their data—a single source of truth. How can they achieve this?

Callan has developed the concept of the institutional investor “Data Vault,” a repository where data is collected, cleansed, aggregated, and curated. We look at the vault as a data continuum with each building block connected by underlying principles of a single data (the “god particle”) enriched for specific purposes based on what decisions to take.

The Building Blocks of the Vault for Institutional Investor Data

There are five main building blocks (or “books of record”) with which institutional investors, investment managers, and others can leverage the data for specific purposes:

Custody Book of Record (CBOR): This is the genetic imprint of the data and comes out of the securities’ movement-and-control platform managed by the custodian. This is real-time data, where an institutional investor can see cash balances, trades, corporate actions, and other activities in the portfolio. Everything gets tagged in this realm, and a security master database is required. This is, essentially, the “digital fingerprint” of the god particle.

Accounting Book of Record (ABOR): This is the end-of-day reconciliation true-up so that investors or portfolio managers know what they have, and it is the source of the net asset value (NAV). This is the basis for financial reporting and audited financials. This is also the formal basis for all performance rate-of-return calculations. This is part of the responsibility of the custodian of the assets as the official book of record, unless a portfolio manager or investor elects to use another platform or entity to generate this report, as long as it is truly a multi-currency, full accrual, trade date-based general ledger platform.

Performance Book of Record (PBOR): Performance or rate-of-return calculations should be generated based on the ABOR. PBOR should be sound, and able to handle both time-weighted and dollar-weighted rate-of-return calculations, both lagged and unlagged, and all consistent with the Global Investment Performance Standards (GIPS). While a custodian can generate the PBOR, other entities are relied on for this purpose, such as investment consulting firms. PBOR is the basis for all risk and analytics, attribution, peer group comparison, and risk-adjusted calculations.

Investment Book of Record (IBOR): This is the most-enriched data element and is relied on by portfolio managers for their investment decisions. This is CBOR/ABOR+, the first data set looked at by a portfolio manager at the beginning of the day to understand the battlefield. This is enriched with morsels of risk information; economic and financial data; cash positions; industry, sector and country metrics; compliance issues; and current events, as well as where the trades are happening and who is executing the transactions. This is where the search for alpha starts!

Governance Book of Record (GBOR): This is the evolution of the data propelled by environmental, social, and governance (ESG) principles. Essentially, this is a cut of the data through an ESG lens. As proper stewards, this is what clients are asking for and trying to decipher.

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