In The Art of Perfection series we are exploring what asset managers can learn from the worlds of art, science and studies into the human body.
In this second issue: a revolution in accuracy that has redefined time.
How precisely can time be measured? Much more since physicists recently created the most accurate clock ever built which could rewrite the official definition of a second.
How many seconds are there in an hour? What about a day? Pretty easy to work this out. What about a year? Still within relatively easy grasp. Now, how many seconds are there in 15 billion years? That’s three times the age of the earth and even older than the Big Bang.
Looking to the future, this is how scientists have explained the absolute perfection of the earth’s most accurate timepiece: in 15 billion years time, they claim, it will not have gained or lost a single second (unless of course the predicted Big Rip ends the universe sooner).
Clock experts at Physikalisch-Technische Bundesanstalt, Germany's national metrology institute, have achieved this breathtaking achievement by measuring the vibrational frequency of ytterbium ions as they oscillate back and forth hundreds of trillions of times per second between two different energy levels.
These ions are trapped within an 'optical lattice' of laser beams that allows scientists to count the number of ytterbium 'ticks' per second to measure time so accurately. The result is an optical single-ion clock that is 100 times more precise than caesium atomic clocks that were previously the most exact.
A clear parallel is that “accuracy” is an ephemeral concept: what is seen as accurate today will likely be regarded as a rough estimate in the future.
Just as the new atomic clock has changed the way time can be measured, the challenge for asset managers in 2017 is to change the way they measure performance and attribution, with improved accuracy needed across a wider range of asset classes.
The quest then is for ever increasing perfection in both timing and accuracy, with the ability to tailor end reports to suit the different needs of a range of stakeholders.
Scalable cloud-based systems hold the key to this. Holding the application and its data in the cloud means that asset managers can now pull the data from a single source, apply the analytics and push that data back to the end user in a format that is appropriately configured.
This is not just about the fund’s performance and risk; it also helps the business as a whole. Having integrated risk and performance measurement can help companies quantify risk appetite and tolerance, identify potential risks across the portfolio, assess risks to performance goals and align financial incentives for risk taking with potential outcomes.
Elastic cloud computing also means speed. Even for the largest firms and asset servicing provider, it is possible to expand bandwidth instantly and cope with increased volumes of data and calculations.
Cloud-based systems can also be updated and adapted remotely and quickly. A system can share various data sets and then multi-task when it comes to analysis and output. Doing this within an automated workflow saves valuable time.
Platform configurability is also useful in a world where the users’ demands change rapidly. Trading volumes haven’t necessarily increased but the complexities in the data means that it is more granular and that leads to more facets to the data. Teams still need to work faster without compromising accuracy in a more complex investment environment.
Like the strontium atomic clock that has redefined horology and even time itself, the asset management industry is constantly redefining the next generation of performance measurement systems to achieve levels of accuracy and scalability that were unachievable ten or even five years ago.
With 93% of asset management firms saying data is a highly important - or even the most important - strategic priority in a recent survey by State Street, pin-point accuracy is the big industry concern today.
As a final thought, we asked how many seconds there are in 15 billion years. The answer is 4.7335389e+17 seconds or - written in full - 473,353,389,000,000,000.
(Based on an exact solar year: 365.25 days minus 11 mins and 14 seconds).
Hands up if you got it right.
- The middle office now needs to supply more in-depth and granular reporting in a shorter period of time
- Achieving better levels of cost efficiency is hard with slow legacy systems that consume valuable time
- Elastic cloud-based systems allow teams to scale up and process increased volumes of data when needed
- The vast majority of asset managers see data management as the most important strategic priority for their firm