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Presenters: Tal Sansani, CFA (Quantitative Analyst / Portfolio Manager, American Century Investments) Sampath Thummati (IT Manager / Advisor, American Century Investments) Presentation Date: February 26, 2013 This presentation is about how American Century Investments revamped their research and production platforms with Revolution R Enterprise.
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Revolution Analytics Customer Day
Tal Sansani, CFAQuantitative AnalystPortfolio Manager
February 26, 2013
Sampath ThummatiIT Manager/Advisor
American Century Investments
Notes American Century Investments | Kansas City, MO
– Founded in 1958
– $125 billion assets under management*
– One of the 20 largest mutual fund companies
Quantitative Equity Group | Mountain View, CA
– $8.5 billion in assets under management across 22 mutual funds and separate accounts
– This group takes an objective, systematic, and disciplined investment approach
– Combines quantitative stock-selection models with portfolio optimization procedures, to systematically determine which stocks to buy or sell.
– Fully Transparent Process: Stock-selection models are founded on economically sensible ideas and implemented using carefully calibrated statistical methods.
The Team
– 10 experienced investment professionals with backgrounds in finance, economics, accounting, mathematics, and statistics.
– Supported by a team of 4 IT professionals
American Century Investments: Company Overview
2
Notes Quantitative Research Analyst & Portfolio Manager
With American Century Investments’ Quantitative Research Team for 7+ years.
Research Responsibilities
– Research and develop stock-selection signals (alpha) that systematically inform our funds on which names to buy or sell.
– Research and develop portfolio construction techniques that help our funds mitigate unintended risks and exposures.
– Monitor the performance dynamics of our models and asset positions with proprietary analytics and attribution dashboards
– Currently putting research projects aside (briefly) to revamp our research and production platforms:
Helping lead the design and development of an end-to-end quantitative research platform, built atop an internal/collaborative R-package rACI
About Me: Tal Sansani
3
Notes In 2012, after years of pain and suffering, we initiated a move away from our
existing infrastructure…
Extensive limitations with our pre-existing platform:
– A disparate blend of CLOSED 3rd party financial software
– Functionally limited and difficult to customize
– Restricted to specific data vendors/sources/asset-classes
– Difficulty streamlining multi-dimensional processes
– Cumbersome and costly
In-house Solution: a streamlined, scalable end-to-end quantitative platform
Data Acquisition, Data Cleaning & Model Building
– RevoR w/ SQL, populated with variety of data-sources, and proprietary feeds
Portfolio Optimization and Strategy Simulation
– RevoR w/ powerful 3rd Party Optimization API
Model Analytics & Performance Attribution
– RevoR w/ tableau (and existing R graphics/publishing packages)
Production Processes
– Controlled environment, deployment
Revamping our Research and Production Platforms with RevoR
4
Notes
Analytics Function Library
rACI Package (w/ RevoR)
Model Building Function Library
Data Acquisition Function Library
rACI: A growing, multi-team, collaborative R-package within American Century Investments
Portfolio Optimization and Simulation API
Market Data from Thomson Reuters (QA-Direct)
American Century Quant Proprietary Data
Additional 3rd Party Data Vendors
Live Analytics
PRODUCTION MODEL GENERATION AND TRADING PROCESSES
Data Feeds
Notes Why Research likes RevoR?
– We love R, and all the benefits of the fastest growing open-source statistical programming language, but with $8 billion on the line, we sought a trusted enterprise solution for research and production processes.
– Optimized performance: We’ve observed our simulations to be 20x faster than with base-R, vastly improving research turnaround
Immediate Results: New RevoR-driven solution is a huge upgrade on our pre-existing platform
– With improved analytics and streamlined research processes, we can better understand the behavior of our models and more quickly adapt to material market changes.
– Decoupling our investment processes from closed 3rd-party vendors has allowed us to combine and analyze more types of financial assets (not just stocks), leading to new investment products (combining credit instruments, options, commodities, etc.)
– We can now leverage all the rapidly evolving libraries of R in our research, leading to more proprietary and cutting-edge quantitative models.
Immediate Research Benefits Gained By Infrastructure Revamp
6
Notes
Example 1: Streamlined Research Simulations/Diagnostics
7
A 3-Step Process:1) Construct a stock-selection
signal and submit it to the database
2) Run customized simulations and pre-packaged analytics
3) Visit the Quant Research Portal for the results
Notes
Example 2: Opening up Our Research With R’s Rapidly Evolving Open-Source Library
8
By integrating existing financial datasets with new/unique information, while leveraging a variety of packages available in R, our group can explore new avenues of research.
In this example, we use revenues between customers and suppliers, to explore how information travels through an economic network.
Note: R’s igraph package was used for much of the internal analysis, while Gephi was used to construct the chart you see on the right.
The Economic Ecosystem
Notes Responsibilities
– Architect and design investment management systems to support quantitative research and portfolio management.
– Production support for quant model generation and other investment management processes.
– Currently leading the implementation of quant roadmap to build efficient cross-asset class research platform for alpha generation, back-testing and analytics.
R Experience
– R-user for couple of years now
– Integrating applications interfacing with R code
Database, Java Components, Batch Scheduling System and Custom applications
– Building configuration functions
Error handling
Application logging
About me: Sampath Thummati
9
FOR INTERNAL USE ONLY
Notes ACCESS TO UNIQUE DATA-SETS
– New, innovative investment ideas are the life-blood of our group, and by extension, so too is our ability to process new information. It’s absolutely critical for us to rapidly adapt to complex data-sets and new technologies.
COMPUTATIONAL CAPACITY
– Controlled risk management and modern portfolio construction techniques require sophisticated optimization toolsets.
CUSTOMIZED ANALYTICS
– Building proprietary models requires proprietary analytics/feedback into the model
ROBUST DATA FORENSICS
– Proprietary data quality tools ensure inputs into trading processes go through a battery of tests
INDUSTRIAL STRENGTH PRODUCTION PROCESSES
Technology’s Role in Innovative Quantitative Investment Management
10
FOR INTERNAL USE ONLY
Notes Why Production likes RevoR?
– Open-source tools generally avoided in large-scale money management
Revo support model
Package verification and certification eliminates risks of malicious code
– Optimized performance
Enables us to run overnight production processes in time for next business day
– Business and production friendly programming language
Research and production now share a common language, reducing risk of errors in code translation
Reduced time to production implementation
Immediate Production Benefits Gained By Infrastructure Revamp
11
Notes
Research-to-Production Transition
12
Notes Error handling
– Intensive ‘try-catch’ use
– Storing images at the point of failure
Robust logging procedures
– Easy to use calls to log
– Rolling logs
Setup batch jobs
– Use of Rscript
– Handling return code
What we did on the production side?
13
Notes Try-Catch Example
Example
14
Notes Batch example
Example
15
Notes Interface with dependency management system
Controlled processes to stabilize production environment
– Third-party packages
– Deploying application and modified packages
– Use of Rprofile for enterprise settings
What we did on the production side?
16
Notes We are about 75% complete with our transition to RevoR
There is growing interest from other parts of the company to contribute and employ rACI
So far, we haven’t experienced any setbacks and are very satisfied with what has been accomplished with RevoR
Current Status
17
