Fund managers are professional asset managers of various financial instruments, including stocks, bonds, mutual funds, and other securities, like real estate, for the financial benefit of investors. These professionals assist institutional and individual investors in the purchase of fixed income securities and derivatives at suitable prices on the secondary market. Fund managers are also involved in the determination of suitable investment opportunities for small investors. The investment manager’s task is to select the instruments that best meet the investor’s needs and preferences, while also providing a high rate of return.
The primary function of the fund manager is to diversify an investor’s portfolio by investing in funds that do not specialize in any single category of businesses or assets. Fund managers typically retain a wide range of investment products, including mutual funds, stocks, commodities, options, and foreign exchange-traded funds (forex). They are also likely to have access to a variety of debt and equity markets. Many companies employ fund managers, who manage the accounts of a company’s institutional investors, rather than the company itself.
Fund managers usually hire investment analysts to help them build and maintain a comprehensive portfolio management system. The investment analysts conduct research and analysis to help the fund managers make the best investment decisions for their clientele. Some of the duties of the investment analysts include evaluating and monitoring the performance of the funds, performing due diligence assessments on the investments of the clientele, determining the risk factors that apply to the clientele, preparing and analyzing portfolio analysis reports, and communicating with the fund managers regarding any changes in the portfolio management strategy. Additionally, some of the duties of the analysts include assisting the fund managers with the creation of policies and procedures, and the development of operating procedures. Some of the duties of the portfolio management analyst include assisting the fund managers with the preparation of the financial statements, the preparation of the annual report to the investors, the preparation of the balance sheet and the management reporting to the Securities and Exchange Commission (SEC).
Most mutual fund managers have investment associates or representatives who provide them with information and assistance with respect to the investment activities of their clientele. The representatives also serve as communication platforms between the fund manager and the investors. The investment associates typically have extensive experience in finance and can assist the fund manager by providing investment advice. They usually act as a liaison between the fund manager and the clients.
Certain institutions allow their investors to “self-direct” their investments through the use of block trades. Block trades refer to transactions in which an investor places a specific order for a transaction to occur, such as to buy a specific stock from the company or to sell a specific stock in the company. In exchange for placing such orders, the fund manager who is acting on behalf of the institutional investor receives an asset allocation benefit, known as a lock-in. Block trades are used by a small number of very large and sophisticated investors, as well as by newer and smaller private sector investors.
The role of the portfolio manager is extremely important. He or she is responsible for identifying assets that will perform well and for identifying companies or individuals that would be ideal to invest in. The portfolio manager must be capable of identifying which investments should be concentrated in certain industries or categories and which should be supported with a wide variety of assets. The investment manager must also be adept at forecasting the likely performance of any given portfolio. Finally, the portfolio manager must effectively communicate the risks associated with the portfolio to the investor. The bottom line is that the successful fund manager must be capable of accomplishing the tasks required of him or her.