Fund Manager

In investing, a fund manager plays a crucial role in managing investment portfolios while making educated decisions to obtain targeted returns for their clients. A fund manager manages a portfolio of securities, such as bonds, stocks, and other assets, and makes investment decisions that maximise returns while minimising risk. 

What is a fund manager?

A fund manager is a professional who manages a portfolio of securities on behalf of investors. Investment management firms, banks, and other financial organisations hire fund managers to manage investment funds, including mutual funds, hedge funds, and exchange-traded funds (ETFs). The fund manager’s primary goal is to achieve the desired returns for the investors while managing the risk associated with the portfolio. 

Understanding fund manager

Fund managers make investment decisions, such as buying and selling securities and managing portfolios to achieve the desired returns. 

The primary advantage of investing in a fund is entrusting investment management decisions to specialists. That is why fund managers are essential in the investing and financial worlds. They provide investors with peace of mind by knowing their money is in the hands of a professional.  

A skilled manager can guide their fund to outperform competitors and benchmark indices. This kind of fund manager is known as an active or alpha manager, while those who take a backseat approach are called passive fund managers. 

Over the past ten years, Singapore has experienced tremendous growth in total assets under management (AUM), indicating its rapid development as a hub for asset management and fund domicile. The nation’s closeness to other Asia-Pacific countries and its well-established transport network makes it a perfect starting point for investment teams looking to track and expand their portfolios, emphasising Asia and finding possible transactions.

Roles and responsibilities of fund manager

The roles and responsibilities of a fund manager include the following: 

• Portfolio management  

The fund manager oversees purchasing, selling, and otherwise managing the portfolio’s securities to get the targeted returns. 

• Asset Allocation 

The process of allocating a portfolio’s investments among several asset classes, including stocks, bonds, cash equivalents, and equivalents, is known as asset allocation. It balances return and risk according to an investor’s time horizon, goals, and risk tolerance. 

Fund managers choose the ideal asset mix with the ability to maximise returns while lowering risk by using their knowledge and analytical tools. 

• Investment research 

Analysing financial accounts, market movements, and economic indicators are all part of this process. The objective is to find inexpensive stocks with solid return potential that fit the portfolio’s risk-return profile. 

• Adherence to regulations 

Additionally, fund managers must ensure that all investment activities abide by all relevant rules and regulations. This may entail staying aware of changes to financial regulations, preserving correct documentation, and submitting required disclosures. 

• Risk management 

The fund manager manages the portfolio’s risk, which includes detecting and reducing potential risks. 

• Tracking and reporting performance 

Fund managers constantly evaluate the portfolio’s performance in comparison to the benchmark indices and the fund’s declared investment goals. The manager must determine the cause of the portfolio’s underperformance and make the required corrections. Additionally, they provide investors with frequent updates on the portfolio’s performance, market trends, and any proposed changes. 

Risk management practices by fund manager

Fund managers use various risk management practices to manage the risk associated with the portfolio. These practices include: 

• Diversification 

The fund manager may use diversification to reduce the risk associated with the portfolio by spreading the investments across different asset classes, sectors, or geographic regions. 

• Hedging 

The fund manager may use hedging to reduce the risk associated with the portfolio by taking positions that offset potential losses. 

• Stop-loss orders 

The fund manager may use stop-loss orders to limit the potential losses associated with the portfolio by automatically selling securities when they reach a certain price level. 

• Risk assessment 

The fund manager may use risk assessment tools to identify potential risks associated with the portfolio and take steps to mitigate those risks. 

Examples of fund manager

• Warren Buffett 

Renowned fund manager Warren Buffett has managed Berkshire Hathaway’s portfolio for many years. He is famous for his value-oriented investing strategy and ability to produce substantial long-term profits. 

• Peter Lynch  

Renowned fund manager Peter Lynch managed the Fidelity Magellan Fund. He is famous for his capacity to purchase inexpensive stocks and reap significant gains. 

• John Bogle 

John Bogle is a famous fund manager who established the Vanguard Group and oversaw the Vanguard 500 Index Fund. His long-term performance in generating high returns and support of index fund investment is well recognised. 

Frequently Asked Questions