What does a Derivatives Risk Manager/Trader do?
A Derivatives Risk Manager/Trader helps insurers to hedge capital market risks within their asset-liability portfolio using financial derivatives contracts. An insurer’s hedging objective ...
Actuarial careers insight: What does a Portfolio Manager do?
What does a Portfolio Manager do?
A Portfolio Manager is responsible for investing money on behalf of clients. My team’s focus is on Cashflow Driven Investing (CDI), which is the concept of investing in portfolios of assets that behave like pension scheme liabilities, thereby reducing risk and ensuring the asset portfolios generate the cashflows needed to pay pensions. We do this through the use of swaps, gilts and corporate bonds for liability matching purposes as well as using FX and Equity derivatives to manage a scheme’s overall risk exposures.
A CDI Portfolio Manager builds portfolios, based on clients’ target cashflows, this requires us to work closely with the scheme’s Trustees and investment advisers to ensure we understand the clients' objectives. We monitor and adjust portfolios over time, to ensure they remain fit for purpose and adapt them in response to ever changing market conditions.
How does this role make use of actuarial skills?
In order to manage the risks inherent in a pension scheme, this requires a good knowledge of its liabilities and the actuarial assumptions that are made as part of its valuation. For example, understanding how the inflation linkage of pension liabilities changes with market movements or the impact of changes in longevity in expected future cashflows. Actuarial risk management principles are also key as CDI portfolios often have leverage, we use scenario testing and VaR techniques to help us evaluate and manage this risk.
What do you enjoy about your role?
I find that managing CDI portfolios combines the dynamism and unpredictability of the markets with the more intellectual aspect of getting to apply actuarial principles to solves real life problems. As well as being a rapidly evolving area, building a CDI portfolio is highly dependent on markets conditions, so this means that we are constantly having to adapt and refine our approach and are never short on new challenges! In addition, working at Legal and General provides a unique exposure to both the pension scheme and the pension buyout markets, allowing us to manage our clients through all stages of their journey.
What has been your career path?
I started out in Investment Consulting after studying Physics at university. I qualified as an Actuary and then went to work in Banking for nine years, working in Pension and Insurance Solutions. Following this, I moved into Portfolio Management with LGIM in 2014 managing CDI portfolios for pension schemes and insurance companies and now run a team that manages over £600bn in risk management mandates.
And what do you like to do when not working?
I like to go running and play tennis and poker. To be honest I enjoy playing pretty much any sport or game which is just as well as that is how I spend most weekends with the kids nowadays!