Kinetic Investment – Part 2 of III

What is the Kinetic Investment Environment?

To understand the Kinetic Investment Environment, you have to view an investment environment in terms of the 4P’s. Let’s start out with the first P, Performance.  Performance in a kinetic environment is all about creating the biggest brain possible.  A multi-sensory interactive Trade Room serves as the eyes and executive center of an investment environment.   The room is one big tactile, visual display.  Wave your hand, point to a ticker, and point to the wall.  The latest economic news and tick data is posted to the trade wall.  The more brains the better as the Trade Room is designed to leverage a team’s collective brain power. 

The second P, Process, is all about the visual engineering of a repeatable and rigorous process.  Visual engineering uses advancements in data warehouses, analytic engines, and visual dashboards.  Need to understand risk in a portfolio….pull up a color-coded heatmap showing Component VaR.  Want to understand how a change in interest rates affects dollar duration?  Pull up a 3-D visual model of simulated yield curve.  If a portfolio position starts to blink red, drill-down into details about correlation.

Changes are not just about the power of visual dashboards.  It’s about using tools in a consistent manner.  Templates are mandatory during the evaluation of a new investment and serve as the basis for ongoing portfolio management.  Because the templates are objects, underlying data, algorithm code, and analytics are stored together in a trade data warehouse.  Meta-data is also maintained and searchable so that trade objects can be referenced, duplicated, and stress-tested.

The third and most important P is for People.  People generate, evaluate, synthesize, and curate investment ideas.  The old school need for only PMs and Investment Analysts on a team is dead.  In a kinetic environment, financial analysis is complemented by pattern analysis across massive data streams and combined into visual analytics.  This new investment team includes skills in data analysis, modeling, simulation, and content presentation.  Risk and compliance are incorporated as front-end activity via visual dashboards.

The last P of the Kinetic Environment is Philosophy.  Although complex technologies are used, the philosophy is simple.  It’s about telling a good story.   The people and technology translate collective data points into a cohesive visual story.  The story can be recited from analyst to CIO and from investment committee to investor.

 

 

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