The capital markets are dominated by the big players—global investment banks and asset managers with financial and technological muscle to flex, crowding and jostling one another for more market share. These firms are usually the ones to grab the headlines, but they face very real competition from a group of smaller, nimbler players that can boast far greater nuance and agility.
One such firm is Aspect Capital, a London-based systematic hedge fund that has gone from strength to strength in the 18 years since its inception. Today, Aspect manages around $5 billion, primarily invested in the Aspect Diversified Programme, which covers several asset classes in over 140 markets via a series of fund- and client-specific managed account vehicles—all with a staff of around 110 people.
The foundation of Aspect is its proprietary software development and technology infrastructure, overseen by CTO Barney Dalton, for whom the importance of agility goes way beyond a board-room buzzword. Instead, it is the keystone of his domain.
The agile software development process in place at Aspect was introduced by Dalton four years ago, with the help of a team of consultants to fulfill the technology and cultural evolution required for the shift. “Agile is a whole mind-set and there is no single practice that in itself makes you safe,” he explains. “It is the combination of multiple different practices that significantly reduce risk.”
Small and Swift
“We don’t slice and dice and move people around all the time. But if the board says they want to spend 30 percent in one area, we do have the ability to be true to that allocation via the sprint process.”
The agile methodology is simple at heart: By keeping development projects small and swift with continuous integration, software risk is minimized and avoids the inherent problems of inflexibility and lack of momentum associated with conventional waterfall models.
Aspect adopts two-week horizons for each sprint session, which encompasses testing, development and integration, part of a wider theme that fits into a quarterly process decided by the board, of which Dalton is a member. It’s a move away from manual, human verification behaviors to flexible testing environments that can be run at any time, not just when software is released.
“We operate on much faster cycles, so the releases we put out are much smaller, which might represent anything for hours to two weeks’ work,” Dalton explains “You get much better visibility of what is in that release; you can understand all of the moving parts,” he says. When we met recently for this interview at Aspect’s London office, Dalton and his team were coming to the end of one of their bi-weekly sprint sessions, involving numerous prioritization meetings to disseminate the workload for the upcoming two weeks, ensuring that it is aligned across both business and technology.
Dalton’s position as CTO and as a board member means that he possesses an holistic view across Aspect’s operations, from the strategic planning that results in an enterprise-wide, two-year roadmap, to the nuts and bolts of encoding and testing involved in each sprint session.
“There is a balancing act between satisfying the business in terms of exactly what they need in the next few weeks versus having an eye on the longer-term roadmap,” he says. “We have an architecture group within technology and an agreed set of roadmaps—what we will do as part of the prioritization is pick off bits of that roadmap alongside what the business needs to do.”
A to B via Z
At first glance, Dalton’s route to Aspect looks somewhat haphazard, but when examined closely, the various elements fall into place to provide a complementary skillset suited to the demands of overseeing the technology architecture at a firm like Aspect. Armed with a first-class degree in mechanical engineering from Oxford University, he headed down under to study for a PhD in robotics at the University of Western Australia. It was a “broad exposure to technology,” says Dalton, who learned how to control robots using the fundamentals of the internet, such as it was in the late 1990s.
Returning to the UK, Dalton took a position with digital signal processer Radioscape, working on a combination of projects involving digital radios and the 3G mobile communication standard, cutting his teeth in software development lifecycles and processes, learning a crucial lesson for the future about the dangers involved in such projects.
“On the digital radio side, we were building both the infrastructure for broadcasting and the radios that would end up in shops,” he explains. “Consumer radios required a big emphasis on code efficiency and reliability. Once it was out in the stores, you couldn’t update it.”
It’s a valuable lesson for a technologist to keep in mind, especially within a high-pressured environment, such as Dalton’s first foray into the financial markets with hedge fund Brevan Howard in late 2004. Dalton took a position as a quant developer supporting growth across a number of instruments and working closely with the traders, not to mention directly with co-founders Alan Howard and Chris Rokos, two of the hedge fund space’s big names.
As far as introductions to the financial markets go, it was something of a baptism of fire, or as Dalton puts it: “Direct exposure to the sharp end of a hedge fund. I got some very honest and direct feedback.”
After two years at Brevan Howard, Dalton moved to Aspect Capital to head up its research technology activities, eventually taking over responsibility for the firm’s software development.
Dalton initially held the director of technology role at Aspect—one that he describes as downward-facing, taking on the infrastructure and support side, leveraging the knowledge gained during his PhD studies to unite infrastructure and development capacities—before stepping up to the C-level.
“For the last four years, I have been CTO and on the board, which has opened up a different dimension,” he says. “It is not just about being a technologist; it’s about being another person around the boardroom table to provide an alternative viewpoint. For a fund like Aspect, where we are systematic and are driven by and are reliant on technology, I think having technology represented on the board is a strategic advantage.”
A common criticism of investment firms is that it’s fine to have a dedicated representation of technology at the C-level, but it needs to be understood across the board to be fully leveraged. Aspect has such aptitude in spades; both CEO Anthony Todd and research director Martin Lueck possess strong technology backgrounds and a history with alternative investment firm Adam, Harding and Lueck, acquired by the Man Group in 1994.
Dalton describes his responsibilities as similar to steering a ship. “Quite a lot of what I do is prioritization and direction setting on different time horizons,” he explains, referring to the strategic element of the agile software development process.
The importance of prioritization for each theme allocation is symptomatic for smaller firms that lack the financial and personnel resources of larger peers. For Aspect, theme allocation is key in its alignments; getting the very best value from his team while staying true to the needs of the business without constant reshuffling of staff is just another part of Dalton’s day.
“We don’t slice and dice and move people around all the time,” he explains. “But if the board says they want to spend 30 percent in one area, we do have the ability to be true to that allocation via the sprint process.”
Dalton estimates the real figure of development staff who could work in any given area would be closer to 70 or 80 percent, therefore calling for a certain type of developer.
“The developers need to be what I think of as a complete developer,” explains Dalton. “Our developers get involved in the entire lifecycle, from talking to the business users all the way to supporting the software in production, and all the bits in between—writing and conducting tests, and documenting new features.”
The importance of having the right team and culture is vital to both Aspect and Dalton, who had the task of re-aligning the development teams to fit Aspect’s current agile process. When Dalton joined the fund, there were multiple teams looking after individual business areas, causing alignment challenges and a siloed mentality, reflected in system duplication and isolation, a common issue across technology departments, best addressed by moving to a single, unified team working on a shared technology stack.
As part of the agile process, Aspect’s developers all work within the main codebase instead of separate branches, with automated testing conducted against the whole codebase as soon as changes are made to the software. All of this results in an agile codebase that can be adapted to suit the next business requirement and a development team that Dalton considers to be his real accomplishment at Aspect. “If I look around, that is what I am most proud of,” he says. “We have a fantastic team and the way they work is extremely professional and of very high quality.”
Pros and Cons
Agile development has its merits for modestly sized investment firms such as Aspect, enabling it to respond to rapidly changing market and investor demands without the challenges of legacy systems or lengthy integration projects. However, there are still challenges that that need to be taken into consideration—the amount of effort required to maintain such continuous process operations, for example. Bringing in new team members can be a daunting prospect if they have not been part of an agile environment before.
“You need to continually review how you are working as a team,” Dalton says. “It’s about continuing education and process improvement.”
Another continual challenge for Aspect’s technology stack is that of upgrades. The firm may not face the same legacy issues that typically plague large capital markets firms, but keeping its systems up to date is another facet that must be managed.
“Even if the business isn’t asking for anything new, the technology landscape is continually evolving and you have to devote quite a lot of effort to staying up to date,” Dalton explains. “Given the number of systems we use and how often new versions of individual systems are out, you could spend the vast majority of your time just upgrading and staying with the latest version.”
Conversely, the danger of taking a lax approach to system upgrades can result in a sprawling, unmanageable technology estate. Dalton’s answer to this is to stay pragmatic. “The moment an upgrade is competing against a fund launch, if you are not able to ensure people have a wider perspective, then the fund launch is always going to win,” he says.
It’s another reason why having the board level representation and understanding of technology can be so crucial, particularly if, like Aspect, the majority of the technology stack is proprietary.
Dalton says Aspect’s proprietary USP technology allows the firm to offer greater transparency and institutional robustness than other hedge funds. That said, the number of proprietary technologies increases the closer one gets to the front office, which can prove costly. The expensive nature of maintaining a full front-to-back proprietary stack means Dalton is always on the lookout for third-party solutions that can slot into Aspect’s middle- and back-office processes, but is realistic enough to know that there are no silver bullets on the market.
“You generally make a trade-off when you get a third-party system,” he says. “You don’t have to maintain and develop it yourself, but obviously you have to pay for it and it’s not necessarily going to do everything or be as customizable or aligned with Aspect’s business processes as a proprietary system.”
It’s crucial for Aspect to strike the right balance between the customized, dedicated proprietary systems developed in-house and those brought in from external sources to plug the gaps elsewhere. Dalton is aware of the developments occurring in the fintech space and beyond, pointing to the wider functionality beyond storage and compute capacity offered by Amazon Web Services (AWS) as areas of possible interest for research simulations or testing environments.
Infrastructure as code (IaC) and DevOps are other areas that Dalton is evaluating for the future of Aspect, building on an existing framework to create a more responsive stack. “We have had IaC for four years, but the toolset has moved on a lot since then so we are looking at version two,” he says. “Things like Puppet and Chef, and some of the orchestration tools, will align quite nicely with AWS if we wanted to use it for some aspects of our deployment.”
Aspect does of course possess more specific roadmaps on how its trading systems will evolve. However, due to the proprietary—or “Aspect-centric” as Dalton puts it—nature, it wouldn’t mean much to anyone outside of the business. He does, however, mention a broader move to supporting more asset classes through the expansion of the middle and back office, while still taking into account regulatory requirements.
Dalton says he is all too aware of the inherent risks in automated trading, taking lessons from errors of the past by firms such as Knight Capital, which lost $460 million due to a trading error in August 2012, after it deployed untested software into a production environment.
“We trade systematically and automatically, so what we trade is generated by a system rather than a person,” Dalton explains. “The actual execution of the trade is also automatic in the vast majority of cases. The level of automation has increased over the years and so the implications of something going wrong in technology have also increased.”
It’s another justification for the implementation of agile software development at Aspect; reducing the risk of untested software means errors within the automation process are greatly curtailed.
This, like so much of Dalton’s work and Aspect Capital’s operations, is rooted in control. Dalton himself is a keen kite surfer and cyclist, and has retained an interest in robotics from his days in academia, activities that all speak to a level of directional perspective, discipline and agility—the fundamentals of the technology architecture he is responsible for on a daily basis.
Barney Dalton Fundamental Data
Name: Barney Dalton
Hometown: Sevenoaks, UK
Title: CTO, Aspect Capital
Education: MEng, 1st class, University of Oxford; Robotics PhD, University of Western Australia
Hobbies: Cycling, kite surfing, fundraising through sponsored events
Fun Fact: Dalton considers the shower system at Aspect designed using a Raspberry Pi as one of his finest technology developments
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