Some of the best jobs in contemporary trading are for systematic traders working with quantitative hedge funds. These are traders who design trading strategies using computing models, which trade automatically. It's a job that might sound low maintenance - you design one successful computer algorithm which trades for you and the job is done. This isn't exactly the case, says Robert Carver, the former head of fixed income at quantitative hedge fund AHL, who outlines a typical day.
When I worked for an investment bank I had to be at my desk for 07:30. But most systematic traders don't actually trade – their systems are fully automated. So there is more flexibility around working hours: because it's a creative job it's better to work when it suits you.
This part of the job is the same for all traders. I managed a team and we took turns doing this relatively boring but important task. Too many 'quants' get caught up in the abstract world of financial models and lose touch with the market.
At systematic funds traders work closely with software developers. We even adopted some of their working practices – including this meeting. Every morning we discussed what progress we were making and what was holding us up. This meeting is sometimes called a 'stand-up': nobody is allowed to sit down – which ensures it's is over quickly.
Data is the lifeblood of the systematic trader, and new sources of data are always appearing. But using new data isn't straightforward. The data has to be sourced, we have to work out how to feed it into our databases, and it will probably need to be cleaned to remove erroneous entries.
We had a dedicated team of client managers, but as a senior manager I still had to show up for meetings with more important customers. My everyday clothing was jeans and casual shirts, but on days that clients visited I would don a suit and tie. Clients were usually interested in new ideas, and we were quite open in discussing them. The more information you can give about your strategies, the more likely you'll get investment.
Once you have some data the next step is to test and develop a trading strategy that uses the data. This is probably the most exciting part of the job – nothing beats the "Eureka!" moment when you find something new that appears to be profitable. However this is just the beginning: the strategy has to be thoroughly tested to make sure it is robust.
At lunchtime I would head downstairs to our office canteen. The menu changed every day, and there was even a bar (sadly not open at lunchtime – probably a good thing!). If I was really busy I just grabbed a sandwich to eat at my desk, but there was usually time to sit down and catch up with some colleagues.
All research has to be written up before the idea can go further. It's also important to document ideas that didn't work – otherwise someone else will waste time trying the same idea.
Some funds operate in "silos", where you develop your own ideas and keep them secret. But I worked in a colloborative business where we worked together and shared information. This helped improve good strategies, and made it less likely that bad ideas would be implemented. The downside of this is that there a lot of meetings!
All systematic traders have to be able to code, otherwise you can't manage data or test strategies. However it's unlikely that the prototype code written to test the strategy will be robust enough for trading with real money. Professional software developers code up the "live" production algorithm, working closely with the traders.
Actually putting a strategy into live trading is a team effort involving people from all over the business including technology, operations, compliance, risk and many others. Systematic funds don't usually have the "rock star" mentality of other hedge funds where star traders get all the attention. Everyones contribution is important and acknowledged.
The journey home was an opportunity to catch up on the latest academic research. Hopefully they would inspire me to dream up a new idea whilst I slept.
Robert Carver is a former head of fixed income at quantitative hedge fund AHL. Now retired he never has to wear a suit, but still systematically trades his own account. He is the author of 'Systematic Trading' and 'Smart Portfolios'.