Integrating and Streamlining Portfolio Construction and Execution

A single platform that contains all of the data, analytics, and development tools for portfolio research, construction, and execution is a huge productivity boost. One that can support a continuous cycle from prototype to production, including fully automated trading workflows, is truly powerful.

Moving Away from Disconnected Systems

Investment managers today often rely on multiple, disconnected systems for portfolio management, with data & analytics terminals sitting beside order management systems, augmented by spreadsheets or prototyping tools for researching new models. Pricing, valuing, and position-keeping complex instruments in this environment is challenging. While order management systems and analytics terminals allow investment managers to use their analytics and frameworks, getting at their source code to fully understand how it works under the hood, or making proprietary extensions, has not been possible. Until now.

Beacon helps quantitative investment managers streamline their workflows from data integration through factor analysis and portfolio construction. Quants can leverage our suite of market, instrument, and deal models to produce tradable orders. Combining these three models under the same platform streamlines portfolio construction and implementation, while our trade blotter seamlessly integrates with order management systems, execution platforms, prime brokers, and fund administrators.

Facilitating Research & Development

Factor analysis, a statistical methodology for grouping a large number of variables into a smaller set of categories within which variables co-present and move together, is made easy inside Beacon. Users can blend a linear combination of factors they create to form trading models with optimal diversification leveraging Beacon’s extensive object database. This allows portfolio managers to accurately dis-aggregate risk and monitor each component of their P&L.

On a technical level, Beacon’s object database, incorporating time series and reference data, feeds our market models, which in turn value and price instruments that live within books and portfolios. The platform’s data, model, instrument, and deal frameworks harmoniously coexist in the same environment, eliminating the need for quantitative managers to use separate platforms between R&D and production workloads. 

Each layer of this financial object hierarchy is exposed in source code. Beacon not only transparently licenses our source code to clients, but our Integrated Development Environment (IDE) encourages them to reuse, subclass, and customise our code, integrate external analytics libraries and add proprietary extensions. We use Python as the primary language to interface with and stitch together financial objects to form business logic, enabling quants to customise at any level of portfolio construction and management. Additionally, our IDE with built-in version control allows developer teams to pull the data they need in a single consistent way, easily collaborate with others, and reuse existing code.

There is a vast ecosystem of third-party libraries that are commonly used for optimal portfolio diversification, including classical mean-variance optimisation techniques and Black-Litterman allocation, as well as more recent developments in the field like shrinkage and Hierarchical Risk Parity, along with some experimental features like exponentially weighted covariance matrices. Beacon supports multiple languages in process runtime, so managers are able to use libraries in Python (e.g. SciPy), C++ (e.g. QuantLib), C#/.NET, Java, R, MatLab, and more. Flexible service deployment and interfaces also allow Beacon to integrate with pretty much any other system or data source.

Improving Risk Management With Automation

Instruments and portfolios need to be monitored continuously, so your platform needs access to data in a consistent way across all applications. Customising how these instruments are priced is critical for valuing not just the instrument itself, but the instrument as a function of the entire portfolio. The ability to run hypothetical portfolio risk is key to adding new positions, e.g. inserting a hypothetical (null value) instrument into a production portfolio, and then running a risk report on this hypothetical portfolio.

Beacon platform gives users the ability to re-engineer the portfolio and dis-aggregate risk into separate components—not just on an instrument level. These separate components are dynamic, and therefore managers need to constantly change how they are blended. Often these types of adjustments require inspection by a number of different analysts and managers, and so a robust workflow management process is needed to implement such critical changes. Alterations may, for example, need to incorporate risk limits both on a P&L perspective, but also on a compliance perspective, e.g. UCITS restrictions on asset weightings.

An important part of a systematic trading workload is the ability to automate as many jobs as possible. Automation enhances operational efficiency and reduces the risk of errors, accelerating the ability to add value to your trading strategy. An example of this may be configuring a simple auto-hedging job that runs against a book to re-hedge your portfolio at a defined frequency. Underpinning Beacon Platform is an enterprise scale, elastic cloud infrastructure, incorporating a powerful and user friendly job scheduler and compute manager that provides flexible resources to applications, Excel backends, and developer services.

Streamlining Portfolio Management From End to End

Beacon Platform was designed from the beginning as an agile innovation platform, combining the speed and ease of use of a prototyping system with the scale and controls necessary for deployment in the largest organizations. Transparent source code and a solid foundation of standard financial models and analytics reduce the need for reinventing common code, enabling portfolio managers and quants to devote more of their time to sourcing new alpha generating trading signals and onboarding them into a tested framework.

By incorporating a development platform with a powerful trading & risk management system, Beacon streamlines management of the entire software development life cycle. This end-to-end framework is native to the platform and allows quants and researchers to work closely with portfolio managers and traders to iterate and frequently deploy changes to applications intraday, without the need to request changes from a vendor or pass changes to another department to implement them into production over a longer timeframe.