"Like Heston's gateau, time and effort must be put into sourcing quality ingredients or data whose attributes are accurate, well regarded and consistent."
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 issue: how the scientific approach produces consistently delicious results.
It’s an insane endeavour, requiring over £100 of ingredients and a further £100 of narrow-purpose ‘kitchen’ gear, including whipping siphons, vacuum storage bags and paint sprayer guns.
The Black Forest Gateau recipe is one of Heston Blumenthal’s signature dishes, famous from the Fat Duck and the In Search of Perfection series.
The end result should be perfection in both presentation and taste and as with all of his ‘perfection’ recipes, Heston specifies some very specific, and very pricey, ingredients.
Clearly this is no ordinary cake; it’s demanding and expensive, including the world’s best chocolate from Amedei in Tuscany. Is it all worth the effort?
Asset managers can take away several points from Heston’s Black Forest Gateau?
A demanding clientele
Well, asset managers need to be mindful of the requirements of their end clients – their demands are very clearly worth meeting if the business is to survive. Those clients increasingly want granular and up to date reporting that is relevant to them and that is accurate and timely. Without this the client is more likely to turn attention elsewhere and with that, the asset manager faces the possible loss of the investor. In this instance producing the right report and the right time for the end investor is very much worth it.
In terms of internal monitoring for performance management, quality and timely reporting then again, being able to assess what has happened performance wise and why and taking action to either do more of the same or to change course directly impacts future performance and with that, the decision of the end investor to stay or leave.
Without providing perfection through accuracy and timeliness, confidence in the figures themselves as well as the asset manager’s ability to steer performance is lost. If a manager cannot account for him or herself then is their handle on the market really enough to ensure that the portfolio performs? It’s about getting the composites of the whole right. Every time.
In the case of both the end investor and the asset manager knowledge is not only power in the form of being able to see and understand performance and its underlying factors, it is also critical to retaining investors by providing both the performance and the report around that too. It is clearly worth the effort!
You get out what you put in
But of course the reporting is made up of several key ingredients all of which must be correctly sourced and mixed together in the right way in order to produce that end report.
Data accuracy must surely come first; without the right measures of the data ingredients the end result will not be correct. Controlling data and its sources has inherent variables and complexity. It is a key part of any middle office’s remit and without the right checks and balances then accuracy cannot be guaranteed. Data accuracy is the starting point for absolutely everything else and the right controls on source data mean that errors are less likely to occur in the first place.
And like Heston’s gateau, time and effort must be put into sourcing quality ingredients or data whose attributes are accurate, well regarded and consistent.
Bringing the ingredients together
Treating that data and applying the analytics comes next. Indeed the actual mixing of the performance management cake report must have a clear methodology that is clear to all so that the end result is the same, each and every time.
Having a clear methodology also means that a set down pathway can be easily traced back to a point in time, should something go wrong in terms of either incorrect data or something going amiss with the calculation.
And advanced data management checks and controls mean that any issues can be easily identified and resolved within the system, as opposed to creating an external manual workaround.
Thus identifying the point at which things went wrong and why means that the next time the same ingredients and methods are in the mix, that attention can be paid to the process to make sure it is smooth and faultless.
Key to that though is the ability to tweak that methodology, should the chef require a slightly different output. A system must, therefore be highly configurable and able to bring in something slightly different ingredient wise and do something slightly different with those ingredients, methodology wise. The crucial part is that both ingredient and method should be clear to all.
This should bring about the end result; the performance management report should be perfect in both its presentation and its content. This means that the system must be able to be configured in order to tweak presentation for the end user. Some users might want more graphs and charts and less data while other might want less visual information and more underlying data or an in depth calculation methodology.
As a middle office process, performance measurement goes far beyond the perfect end result of maintaining accuracy and timeliness metrics. Indeed it’s not just the end result that is at stake but the perfect blend of ingredients mixed up in a certain way to get to that end result. If the interplay between ingredients or functionality is not right, then the end result will be slightly off key too.
Asset managers have much to learn from Heston’s perfection. Being able to apply the same discipline to the performance management system should mean that the end report is based on the same elements and that those elements have been treated the same – each and every time.
- World class performance measurement results require an accurate, faultless process
- Controlling the data to produce specific insights is a fine balance
- Analysis production requires discipline and training
- Without clear and accurate data, the end result will be compromised
- Clients demand the very best results, so the going the extra mile is always worthwhile