What is “The Role of a Portfolio Manager”?

A portfolio manager is an investment professional who is in charge of building and running a fund or portfolio of investments. They are directly responsible for all activities around the security selection and asset allocation, portfolio construction, and ongoing monitoring and management of the vehicle. Portfolio managers work in a variety of organizations, for example in asset management, hedge funds, fiduciary, pensions, wealth management, and sovereign wealth funds. They are usually supported by a team of investment analysts, who research the markets and source new ideas for inclusion into the investment strategy. Portfolio managers are the ultimate decision-makers for their fund but will be usually challenged by an investment committee and/or the Chief Investment Officer.

Key Learning Points

  • A portfolio manager is responsible for running an investment mandate and will make all important decisions around the investment process, portfolio construction, and ongoing monitoring of existing holdings
  • This is a highly regarded position, that is in demand in a variety of different industries
  • Portfolio managers need to be on top of economic events, the latest developments in the financial markets, and corporate news
  • They are usually supported by a team of investment analysts that will generate and propose investment ideas

What Portfolio Managers Do?

Portfolio managers are primarily responsible for running investment mandates. These can be vehicles of different structures, for example open-ended, close-ended, private client portfolios, etc. They would normally specialize in one area of the market such as equities, bonds, property, currencies, and others, or may take a multi-asset approach. Their main objective is to build and run an investment strategy that can deliver higher risk-adjusted returns. Their duties include all aspects of the investment selection process, portfolio construction, and ongoing management. Usually, portfolio managers will assess investment opportunities supplied by the analyst team and will make investment decisions i.e. to buy or sell.

The job is very dynamic and requires portfolio managers to be up to date with the latest events in the markets and the corporate world. They also spend a lot of time doing statistical analysis, seeking areas with attractive potential, and evaluating investment opportunities. Portfolio managers use professional financial software such as Bloomberg, Morningstar, or FactSet in their analysis. The findings are used in presentations to various stakeholders – clients, investment committees, and/or risk oversight teams.

How to Become a Portfolio Manager?

Although this is not a hard rule, a portfolio manager would normally have spent at least a couple of years as an analyst before becoming a deputy and eventually a lead portfolio manager. The whole process could take anything from five to ten and more years (depending on the individual’s experience).

Becoming a portfolio manager is extremely competitive and demanding. Having a bachelor’s degree is usually a prerequisite, but most portfolio managers also have a master’s degree in a financial-related field. Along with that, possessing professional qualifications from respected industry bodies such as the CFA or CISI is often a requirement. Depending on local regulations (which portfolio managers have to master) there could be additional compliance exams to make sure the individual is fit and proper for the role.

Below is a multiple-choice question to test your knowledge, download the accompanying Excel exercise sheet for a full explanation of the correct answer.

Multiple Choice