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Spreadsheets vs. Software

Having an unhealthy love for Excel seems to be a prerequisite to get into business school (Go Blue!). However, I am a technologist first and MBA second. That means that as much as I stand in awe of impressive Excel spreadsheets and the odd pivot table, I love good software more.

Since launching Molecule, we’ve seen some “creative” Excel work by impressive quantitative minds. However, our clients have basically been held to ransom by spreadsheets that only quants could use and manage. Or worse (and more common), trade books have been handled by individual traders in silos.

When you’re working on a team, transparency is important. Everyone at the fund should have confidence that the numbers on their screens – like positions – are accurate. In a spreadsheet, dissecting complex formulas is a headache. Manual data entry is error-prone.

Even worse – we’ve seen funds using incorrect risk calculations for years because of a small error in a spreadsheet. Obviously, the risk that something goes wrong with your spreadsheets increases as the number of traders goes up.

I think that spreadsheets can work for new funds with a trader or two, but there is a breaking point. Here are some signs that you’ve outgrown spreadsheets:

  • You have to keep someone on your payroll just because they’re the only one who can manage your data and reporting.
  • You’re always yelling across the room, “Resave the spreadsheet!”
  • You’re not 100% sure that your numbers are correct, but in your head you have a sense of the risk of the organization.
  • You’ve realized that software offers a much better way to manage your business.

I typically see this transition point happen around the time a company adds a third trader, or reaches $10m in AUM.

If any of these symptoms sound familiar, and you’re ready to explore software options, take a look at our recommendations for running (or not running) a risk system RFP.

Of course, we’re also happy to talk to you about your process and software options. Feel free to email us at info@molecule.io. Having a weird love for software may seem like a prerequisite to email us, but it’s not! You’ll be in a much better place when you know the numbers on your screen are right.