What is a fund manager?
The role of a fund manager is to execute the investment plan and oversee portfolio trading. One person, two co-managers, or three or more people can administer the fund.
Managers of funds receive a portion of the average assets under management (AUM) as compensation. They manage mutual, pension, trust, and hedge funds.
Investors should carefully study fund managers’ investment styles before investing.
Understanding Fund Managers
The primary benefit of investing in a fund is entrusting investment management choices to specialists. That’s why fund managers matter in finance and investing. Investors may relax knowing their money is in experienced hands.
While market variables significantly impact fund performance, management skills also matter. A skilled fund manager can surpass competitors and benchmark indices. Active or alpha fund managers actively manage, whereas passive fund managers take a backseat.
Managers guide mutual funds and pensions. In addition, they oversee a staff of investment analysts. A good fund manager must be good at math, business, and people.
Meeting with team members and clients is the fund manager’s key responsibility. Since the fund manager is accountable for its performance, they must investigate firms, the financial sector, and the economy. Keeping up with industry developments helps the fund manager make crucial decisions that support its aims.
Investors should assess a fund manager’s investment approach before investing to ensure compatibility.
The Fund Management Path
Candidates must possess strong educational and professional credentials and investment management expertise for fund management positions in mutual funds, pension funds, trust funds, or hedge funds. Investors should seek long-term, consistent fund performance with management whose tenure matches the performance period.
Fund managers often acquire a CFA qualification to become the primary stock-picker for a portfolio. CFA candidates study investment analysis and portfolio management extensively.
Analysts often help portfolio managers investigate investment ideas and provide recommendations for purchasing, selling, or holding. The analyst’s career path benefits from fund operations and management experience after several years. If offered, successful CFAs provide a strong case for internal management advancement.
Job duties of fund managers
Fund managers focus on selecting and trading assets that align with the fund’s strategy, as specified in the prospectus.
More considerable funds often include analysts and traders who assist the fund management with specific tasks. Some investing organizations have managers who handle client money or make decisions together.
The fund manager also prepares reports on the fund’s performance for customers, develops reports for new clients on the fund’s risks and objectives, and finds suitable clients and firms.
Active vs. Passive Managers
Active fund managers aim to outperform both their peers and benchmark indices. Managers for Active Fund track market movements, economic statistics, and corporate news.
Based on this analysis, they purchase and sell stocks, bonds, and other assets to maximize profits. Because they actively change their assets, these fund managers demand higher fees. Due to active management, mutual fund costs are high.
However, passive fund managers trade benchmark index securities. This fund manager weights their portfolio like the index. Passive fund managers aim to match the index rather than outperform it. Passively managed ETFs and index mutual funds are expected. These investments have cheaper fees because the fund manager doesn’t have significant knowledge.
Famous Mutual Fund Managers
A legendary fund manager ran Fidelity Investments’ Magellan Fund. From 1977 until 1990, Peter Lynch oversaw the company’s significant stock holdings. Lynch recommended buying equities in his comfort zone. Magellan’s CEO grew AUM from $20 million to $14 billion with an incredible 29% annual return.
85-year-old Albert “Ab” Nicholas is a longtime fund manager. As founder of the Nicholas Company, the seasoned portfolio manager has operated the five-star Morningstar Nicholas Fund since July 14, 1969, beating the S&P 500 Index from 2008 to 2014.
A Hedge Fund Icon
Hedge funds differ from mutual funds by requiring substantial minimum investments from certified investors. After fees, Ken Griffin’s Citadel Global Equities hedge fund returned over 6% in 2018.
Griffin had a net worth of $9.1 billion in 2018. After trading equities in his Harvard dorm room in the 1980s, Griffin entered private equity management and founded Citadel with $4 million in 1990.
- A fund manager executes the investment plan and oversees trading.
- They handle mutual funds, pensions, analysts, research, and significant investments.
- Most fund managers are well-educated, credentialed, and experienced.
- Fund managers are active or passive.