Quality Money Management : Process Engineering and Best Practices for Systematic Trading and Investment

53

4.4. The Role of the Product Team

Our methodology promotes team-oriented problem solving (in the style of TOPS or Ford

8D) for fact-based decision making. The product team is responsible for solving the prob-

lem posed by the Money Document—developing the market opportunity, generating the

data to confirm the vision set forth in the Money Document, analyzing the technical feasi-

bility, implementing the system, and putting in place performance monitoring processes.

In the past, one person could do all of these things, the portfolio manager or trader who

was the primary generator of trading profits. Today, however, the complexities are too

much for one person:

● The mathematics is too complex.

● The trading strategies are too complex.

● The technology is too complex.

● The number of instruments makes trading even more complex.

A cross-functional product team consists of traders or portfolio managers, financial

engineers, and programmers, who work together until the project is complete. (Each team

member should write a brief autobiography so that management and/or investors can

readily determine if the team contains the appropriate skill sets.) These uniquely named

teams (the name describes what the team expects to accomplish) work preferably together

in a single location—voice mails, emails, text messages, and instant messages generally

cannot contain all of the information other team members need to know. Because good

communication is usually frequent and informal, teams should have constant and direct

access to everyone else to avoid wasting time. (In cases where physical proximity is not

possible, or where an individual may be a member of more than one product team, good

communication will be more of a challenge, and as a result, the focus of more effort.) The

product team is responsible for:

● Maximizing the value of individual trading/investment systems.

● Defining the investment, execution, data cleaning, risk, and trading strategies of the

trading/investment system.

● Writing the Money Document.

● Mapping trading/investment system value streams.

● Preparing and distributing performance information.

● Defining consistent and verifiable valuation policies, incorporating “ fair value, ” for

illiquid, hard-to-value instruments, and instruments with multiple official prices.

● Managing the development team of IT professionals and performing quality assur-

ance and user acceptance testing of software.

● Recommending reliable third-party vendors/partners to top management.

● Overseeing the risk and portfolio management functions (K|V Stage 4), and review-

ing performance data, risk position, and sources of variation.

● Developing and monitoring measures of leverage.

● Satisfying its double fiduciary responsibility—to provide better investment vehicles

to investors and better financial results to seed capital investors.

While the product team is responsible for development of the trading strategy, it may not

necessarily be responsible for ongoing operation and maintenance of the trading/investment

4.4. THE ROLE OF THE PRODUCT TEAM