According to a recent ranking by CareerCast.com, the best job in the world (based on physical demands, work environment, income, stress, and hiring outlook) is software engineer. Which may come as no surprise. However, I would bet you half your tax return that you couldn't guess what the second best job in the world is even if I were to give you sixteen guesses.
In any case, the answer is actuary. And in honor of the often-overlooked actuary's commendable second-place finish in the best job in the world ranking, I thought I'd give you a taste of the actuarial sciences by bringing you a day in the life of a financial services actuary (in her own words) who works for a large hedge fund.
A Day in the Life of a Financial Services Actuary
7:30 a.m.: I work for a major hedge fund, so I’m in fairly early, since most people I need to work with are busy trading and monitoring the market between 9:30 and 4. I have a team of three other people, and together we run risk profiles and mitigations for every investment imaginable, from equity options to commodities and currencies. Talk about variables—there’s any number of ways you could play a given trade. We have to find the best one. Usually the day starts slow, but once a week we have a breakfast strategy meeting with the various trading heads to figure out possible moves. That’s when I can chime in and help. It’s still pretty new to the guys to have actuaries on board, but we’re getting accepted pretty quickly. I ran a comparison once based on our recommended move versus the move a 20-year veteran trader ran. We would’ve improved the trade by 400 basis points. They listen more now.
9 a.m.: By this time, whether I’m in a meeting or just looking at the emails, I have a good sense of what the trades might be like today. Hedge funds aren’t day traders by any stretch, though there are plenty of one-off trades during the day that crop up for individual holdings. For those, I’m not needed. But now and then, someone will be thinking of a particularly interesting move, and we’ll try to quickly model that out.
9:30 a.m.: Trading begins and it’s off to the races. We don’t do a lot of moves right away—we like to pick our spots. For me, it doesn’t matter much what the rest of the firm’s doing. My team and I are already modeling out a variety of potential trades, and we add one or two more to the mix every day. We figure out how much to put into one trade, what the best hedge is, and how much to put into the hedge to mitigate the risk while maximizing the profit. A really simple example would be reacting to a dip in oil prices. We believe oil isn’t done, so if we see a dip, we’ll buy crude futures. But we’ll also short ExxonMobil and get a short-term win, and a hedge that way, too. Of course, we’ll have already looked at a million other factors, from the winter weather forecasts to OPEC production, before we recommend anything.
11 a.m.: One of the traders is ready to pull the trigger on a trade. We run the latest models and get them over to the desk ASAP. She didn’t go by the letter of the modeling, but at least went with the spirit of the recommendation. She bought a little less of the hedge—a “gut move,” she told me. We’ll see how it plays out over the next few weeks.
12:30 p.m.: Lunch is nearly always brought to everybody at the firm—can’t afford the time away. Since they want someone from the team around at all times, we eat at our desks, too.
2 p.m.: I’ll often do a quick meeting with a trader on the floor when it’s slow. This is a little late, but the market’s behaving and he has the time. We go over the model for a pretty complex currency swap he’s contemplating. The hedges don’t quite work as well as he or I initially thought, and thus we’d be putting a bit more of our assets at risk than we initially thought. We come up with a few more options which I head back to research.
4 p.m.: Today was an uneventful day for equities, bonds, really pretty much everything. That works for me. There are definitely days where the market just goes in a random direction, and we have to redo a bunch of work to take that into account.
4:30 p.m.: A quick meeting with most of the sections to go over the day’s trades and their results, and to track investments in general. We talk about when a good time might be to wind down an investment, pick up more, that sort of thing. That gives me another set of numbers for the team to crunch.
6 p.m.: This is about when I usually leave, unless there's some really pressing work ahead. When one firm lost a ton of money betting the wrong way last year, I spent a week of sleepless nights figuring out our exposure, past and present, to determine our current risk. Turned out to be not much, especially when it came to light that the trader was simply betting wrong and not telling anyone. Thankfully, we’re better in our internal controls than they were.
WSJ: Best and Worst Jobs of 2012