Master and Commander: Rohatyn Group CTO Warren Master Leads the Data Charge

“I‘ve always thought it would be cool to own the Lost in Space robot waving its hands saying, ‘Danger, danger Will Robinson—sell!’” says Warren Master, CTO of Manhattan-based private investment firm The Rohatyn Group (TRG).

Master has been fascinated by computers, and technology in general, since childhood. His obsession evolved from watching TV shows about computers to studying them and using them to solve real-world problems.

Master’s love for technology and curiosity about all things computer-related is immediately apparent: If you want to engage him in a sophisticated conversation—and you can expect several tangents along the way—ask him about the future of technology, about how one terabyte of data has become commonplace, and about creating computers that simulate the human brain, the inspiration for his “Will Robinson” analogy. He loves—even breathes—this stuff.

Master might best be described as a laid-back techie with tousled hair. On this March afternoon, he sits down with me and discusses how he went from watching Lost in Space as a kid to overhauling TRG’s entire data practice. While there were no shortages of “teachable moments” for Master along the way, he’s a man who sleeps a lot easier today than when he first arrived at TRG back in 2005.

Not Just an IT Problem
“To think that fixing data quality is a technology-only challenge—it’s not. Without proper buy-in, support and engagement coming directly from the individual domain experts in the business, I think solving data-quality issues will fall flat on its face—as I’ve learned, and subsequently fixed,” Master says.

His philosophy is that data quality is not something that can be solved by simply plugging an application into the system and—boom!—you have data quality. It’s not a fair proposition to ask of technologists. It has to be an “all for one, one for all” solution or it just won’t work.

Master, like many technologists in the industry, has been battling the data deluge. That was certainly his greatest challenge when he arrived at Rohatyn in 2005. The firm deals primarily in emerging markets, so the problem is magnified. It has about $3 billion under management and trades in more than 30 different markets.

This presents a challenge, since in these usually under-developed markets data tends to be of a lesser quality than in domestic markets, which are far more automated and have better infrastructures. Additionally, every market has different conventions. Firms like TRG have to be able to look across these disparate markets and find a way to standardize and normalize their data so that, for example, users can see that prices in Brazil look one way while prices in Mexico look another. It’s a daunting challenge.

There’s no doubt that Master has found success in taming TRG’s data. Whereas the collapse of the financial system hobbled—and even wiped out—many hedge funds and traditional assets managers, TRG survived the tumult of 2008 unscathed, relatively speaking, compared to other funds. As an example, the Rohatyn Group Global Opportunity Fund was only down 8.75 percent in 2008, whereas the S&P 500 was down 38.49 percent, according to statistics provided by Hedgeweb. By 2009 and 2010, the fund was back to posting positive returns.

Master credits the firm’s ability to access information—and solid, steady all-around management—as the prime reasons why TRG was able to weather the storm. “Our users know how to get the right information, where to get it, and how to get it out,” Master says.

But it wasn’t an easy process getting to this point and there is always room for improvement. Mistakes were made and learned from, but Master feels that his greatest success was implementing a system that made everyone understand that data isn’t just a problem that only IT can solve—it’s an across-the-board issue that has to be handled at the every level. As a result, Master feels that TRG is stronger today than it was six years ago because the firm understands, as a whole, the importance of data quality.

“The role of IT is really only to provide the enabling technology for a process and policy that should be defined and run by the business areas and partitioned by the individual domain expertise,” Master says. “We have a credit guy, an equity guy, and an interest-rates guy. They own those particular vertical stripes of data within the practice, and they should be accountable for them. It’s not a technology-only problem. People tend to underestimate the complexity of ensuring proper data quality and sometimes trivialize the solution.”

Lost in Technology
As a young boy Master would sit transfixed in front of the television in his parents’ living room. He would watch Lost in Space and Star Trek—William Shatner, not Patrick Stewart—and would escape into their realities. It wasn’t a mindless, boob-tube gaze; rather, he was fascinated by the fictitious technology he saw and wondered whether what he was watching could one day become a reality.

Flash forward to the late 1970s. Master was then a student at North Rockland High School in Thiells, New York. He was asked to participate in an experimental computer class, which he gladly accepted. With this first-hand experience he soon found that these machines weren’t magic—in fact, they were only as smart as the people who programmed them. Rather than being disillusioned, it made Master love these magnificent boxes even more. He was hooked.

Further immersing himself in technology, Master attended Fairleigh Dickinson University and the State University of New York at Stony Brook, where he received a degree in computer science. At the same time that he was taking on a full course load, he also worked a full-time shift at high-volume technology distributor Entre’

Computer Center
During the day he was solving real-world problems and dealing with computers hands-on, while at night he would tackle theoretical problems. It was an intense workload, but Master was happy. “While looking for my first job, I wanted to be surrounded by computers; even if I was just moving boxes I would’ve been happy,” he recalls.

After working at various companies outside the financial-services world, Master answered a New York Times ad that landed him a contracting position at Chemical Bank Capital Markets in the emerging markets division. Chemical, through a series of acquisitions, eventually morphed into JPMorgan Chase, and after a long run the company’s willingness to spend money on contractors dried up.

Master had some acquaintances at TRG, which opened for business in 2002. Additionally, TRG’s founder, Nicholas Rohatyn, was the former co-head of JPMorgan Chase’s technology venture unit. Having a foot in the door, Master had the emerging markets expertise that TRG was looking for. 

For Master, having access to the decision-makers was a major selling point. That’s not to say that bureaucracy doesn’t exist, but the red tape at a firm like TRG tends to be thinner than at a global behemoth like JPMorgan. The CEO’s office is right down the hall and he can always drop in for feedback on various projects. Not only that, but Master shares an office with the firm’s COO and the two often sit and brainstorm on ways to pick the proverbial low-hanging fruit. 

The Big Fixes
TRG also takes on bigger projects—what you might call the higher-hanging fruit. The firm recently finished an order management system (OMS) implementation and retooled its entire data management practice.

For the former project, TRG installed Bloomberg’s Asset and Investment Manager (AIM) OMS. Master’s group is still working on integrating the system with the firm’s other internal systems and figuring out ways that TRG can add new functionality and information.

This OMS marks a major change for Rohatyn and some behavioral adjustments had to be made—but the overhaul was necessary in order to manage the firm’s growing number of funds and accounts. Master likes the system’s pre-trade compliance capabilities, which provide structure around trading operations. And he says Bloomberg comes with a lot of good data—high praise from the man for whom data is king.

But the most impressive undertaking at TRG is its data-practice overhaul. Master asserts that data is a shared problem between IT and business, so the firm has developed policies and procedures for how TRG captures and uses data.

Rohatyn is following recommendations from the EDM Council—an industry group that focuses on enterprise data management (EDM)—when it comes to methodologies for importing data, staging it, and normalizing it. TRG has an in-house validation service that allows users to view the raw data components and write in their own business rules.

More importantly, TRG has a system in place where everyone has access to all the data that enters the organization, in a consistent way. The reporting platform provides users with a front-end dashboard, giving them an inventory and other additional information about the data, effectively exposing the data warehouse throughout the organization.

The most recent upgrade to TRG’s data practice was the integration of Ingres’ VectorWise database last summer. Master told Waters after the integration last year that Rohatyn hasd, for example, 20 different data sources that its clients can filter through and group, and on top of that, there are upwards of 300 different measurements on each of those sources. The result is a staggering number of potential data-output scenarios. Crucially, Rohatyn didn’t want to lose its sub-second response time for its historical data, a scenario that happened with its real-time market data. Master says that he was most impressed with the solution’s ease-of-use and its robust dataset.

Now that VectorWise is live, Master is working with Ingres to figure out ways to use the product for back-testing equity-based quantitative strategies and to support risk-management functions for risk analysis, regression analysis, and alpha and beta analysis to test the validity and effectiveness of past investment decisions. Master believes that VectorWise’s full potential has yet to be tapped.

Data Aggregator
“I don’t believe there’s a silver bullet to accesses data,” Master says. This is to say that there isn’t a vendor solution or internal upgrade that can offer a panacea for data control. TRG uses Ingres for some of its data needs and it also employs structured query language (SQL) for other data issues. The firm has also developed proprietary services.

To help Rohatyn manage the different ways it accesses data, Master has built an aggregator that encompasses all of TRG’s solutions. “I can’t use things like online analytical processing (OLAP), for example, because some of our measures are not aggregate-able simply by adding them up—take Value-at-Risk (VaR), for example,” Master says. “Our aggregator allows us to plug in specialized data sources so that I have risk coming from one service, I have certain data coming from an SQL database and other data coming from VectorWise because it’s deep and wide. I have additional information from a liquidity service, and our aggregator brings it all together in one seamless view for the users. This way you can get profit and loss (P&L) and VaR in the same view, sliced the same way. Later, if I want to take out SQL’s server and plug something else in, or if I want to plug in a new service that calculates a new analytic, it all flows through without changing anything with how the user interacts with the system.”

Further proof of the firm’s success came on the regulatory front. Earlier this year, TRG completed a Statement on Auditing Standards No. 70 (SAS-70) type-1 certification in four months; Master says the auditors told TRG that this normally takes between 12 and 18 months. This is evidence, Master says, of the quality of TRG’s platform.

“I think this is one of the most successful projects at TRG because it hits every part of the organization. Everyone needs data. Data is what drives us, and quality data is important,” Master adds. “All the information that drives the decisions we make on a day-to-day basis—whether tactical or strategic—comes through our data practice, and we’re very proud of what we built.”

On the Horizon
When I ask Master where computer hardware is going, he smirks. He is intrigued by the technological advancements made around behavioral investing. Once there is more information available and there’s enough horsepower to drive such a system, having a computer that acts like a brain would be something that’s very exciting to look at, he says.

Creating more machine intelligence, continuing the progress in processor and semi-conductor technology, and deriving greater speed from smaller processors—the most recent example of which is IBM’s “Watson” super-computer—will create a safer world for investing, Master says.

“That’s what it takes to compete with the human brain,” he says. “Any kind of research and development that can help emulate or simulate human brain function—which may not happen in our lifetime—goes back to all the SciFi stuff. And a lot of that stuff has already been realized.”

Maybe that Lost in Space robot isn’t too far away, after all.

WARREN MASTER FUNDAMENTAL DATA

Typical day: Most of Master’s workdays are spent mentoring and collaborating with his team, peers, vendors and superiors. He views these brainstorming/listening sessions to be the most vital part of his day. About 25 percent is spent on the administration side of the business and about 10 to15 percent is spent researching new technologies or proposals.

Greatest challenges facing the industry: Data quality issues affect everyone. But other challenges include delivering customized regulatory reports, tougher compliance monitoring, and building scale and efficiency to accommodate the demand, while keeping costs down. You can’t hire twice as many people to take on these new things, he says.

What keeps him awake at night? Management demands much from technology and Master’s team typically delivers, but he always worries that a product won’t get the full exposure, utilization and chance to evolve that it deserves.

A Thrill Seeker: As a kid, Master would race dirt bikes on iced-over ponds. He’s still an active skier and dirt-bike rider.

Greatest business success? Building the team that he has at TRG. He has what he calls an outstanding team that he’s very proud of.

Greatest strength? Master feels he has a good eye for talent, attitude and character. Other strengths include promoting a portfolio of technology solutions, initiatives and visions with clear alignment to the firm’s strategies. He solves problems holistically—horizontally, not vertically.