About Universal Ratings
Established in Singapore in 2016, Universal Ratings Pte Ltd is a privately held and independent company. Universal Ratings measures and rates the complexity and the Resistance to Shocks of stocks, portfolios, ETFs, bonds, funds, futures, corporations, markets and countries. Such ratings allow investors and managers to quantify the degree of sustainability of a corporation, a market, a portfolio or a country in the turbulence and volatility that characterise the global economy.
A key feature of our rating capability is that we can analyse and rate large ensembles of corporations, banks, funds, portfolios or markets, treating them as interacting systems. This allows us to understand systemic risks from a totally new and scientific perspective. Using super-computers we can rate the entire global economy and the financial system in its entirety. Every day.
Our Global Financial Complexity Index™ (GFCI™) measures the complexity of the global financial system based on the closing daily values of thousands of tickers collected from the World's main markets. Essential to the global investor, the GFCI™ measures the 'financial temperature' of the entire international financial system, indicating how it reacts to geopolitical events, crises, market bubbles, natural disasters, scandals or other destabilising events.
The GFCI™ has a striking predictive capability in that it allows to anticipate sudden drops of major indices such as the Dow or the NASDAQ.
Our rating system is based on the following rationale:
- Complexity is the hallmark of our times. It also dominates the dynamics of financial markets and of the global economy. However, until today it has neither been measured nor accounted for in risk management, rating, portfolio design or asset allocation.
- When excessive, complexity is a formidable source of fragility and vulnerability. Complexity-induced risk is a huge problem. It makes businesses fragile.
- The economy is punctuated by crises, bubbles and destabilising events. In addition, it is dominated by intense turbulence and volatility. In such an environment, fragility - the opposite of resilience - may be fatal.
- A modern rating scheme is one based on shock-worthiness or Resistance to Shocks - the capacity to withstand shocks and contagion, which impacts sustainability, a key concern of investors.
- Our rating provides unique information: a comprehensive breakdown of the complexity of a business or a portfolio into components. This means investors and managers know where to intervene in order to make a portfolio or a corporation less complex and more sustainable.
- A less fragile global economy is possible but this mandates that investors have reliable and significant ratings which have been engineered specifically for the twenty first century.
Given the pace at which the global economy changes, we introduce the concept of a dynamic rating, which is able to capture its dynamics. This means that the concept of a 'static rating', issued once a year, becomes obsolete. The idea is to track the trend of a rating, turning it into new a source of insights and knowledge.
What We Rate
Our ratings are offered for:
- Single corporations (public and private)
- Systems of corporations (e.g. the entire Oil & Gas sector)
- Systems of banks (e.g. the system of European banks)
- Stocks, ETFs, funds, bonds, futures, etc.
- Stock markets, systems of markets
- Stock market indices
- National economies, macro-regions
- The global financial system
With all likelihood the key characteristic of our Resistance to Shock rating is that it provides a measure of the state of health of the structural aspects of a business or a portfolio. Structure is of paramount importance. To understand a system, to really understand how it functions, means to understand its structure. Structure is functionality. Structure is also information. A stable business has a stable structure. It is structure that reacts to shocks, not just data or Balance Sheets.
Our rating goes beyond the conventional risk rating models which have been developed in the past. Our rating system has been developed specifically for a fast, turbulent economy. Moreover, it is:
1 Independent – we are not controlled by banks or funds. There is no conflict of interest.
2 Transparent – any user can verify the results of our ratings as the method is available on-line.
3 Objective – no subjective weightings or scoring. There is no human in the loop. The algorithm powering our ratings is protected.
Conventional ratings have contributed significantly to the 2008 meltdown because they are opinions. In a fragile and complex economy, dominated by volatility and turbulence, what investors need is science, not opinions.
How It Works
Universal Ratings offers its ratings as a web-service-based on-demand capability. Our clients send us streams of data via a secure connection, we process it and return the corresponding ratings and complexity measures. Universal Ratings establishes the necessary infrastructure to quickly connect the client's data source to our sever.
In order to guarantee confidentiality, data is submitted without naming any of its constituents or specifying dates. None of the client's data is stored.
Secure transmission is offered via hardware or software-based data encryption.
The analytical engine which powers our ratings is based on innovative and non-traditional technology which analyses data based on proprietary algorithms. The approach is based on the Quantitative Complexity Theory developed by Universal Ratings' founders.
In order to access the service is it necessary to:
- Obtain a unique client authentication code which allows access to the rating engine
- Prepare data in the specified format
- Submit data for processing to our server via specific protocol
- Retrieve rating data when notified by our server
We provide our clients with technical documentation specifying data transfer protocols and format and we aid them in establishing the necessary infrastructure. This generally requires less than one day.
We do not resort to conventional approaches such as statistics, Monte Carlo methods, fuzzy logic, fractals, chaos theory or neural networks. Instead, we use a proprietary non-traditional solution which has been engineered specifically for a highly unstable, complex and non-stationary regime in which mainstream analytics and simulation methods are not applicable. Our approach is model-free and has its roots in quantum mechanics.
Our approach to measuring resistance to shocks and resilience is based on a quantitative theory of complexity developed by the founders of UR. This approach constitutes the foundation of the World's first complexity-specific standard, published in Italy in December 2015, the UNI 11613 Business Complexity Assement guidelines. The founders of Universal Ratings are the principal co-authors of this standard.