A fund manager is an investment expert that a mutual fund house employs to prudently invest the funds of all investors. This individual is responsible for doing careful market research, implementing investment strategies, managing investments and conducting trades.
If you are planning to invest in actively managed funds, you must know what is the role of a fund manager and how having one can benefit you. This post helps you get a detailed idea. Keep reading!
A fund manager is a professional investment manager who is responsible for all investment-related decisions. He/she is an indispensable asset to the fund house as they make major money decisions for the clients. They help strategize and plan to benefit the client to the maximum. Let’s take a look at their role in the following section.
Following are the primary duties of a fund manager:
Conducting proper research is an essential and fundamental role of a fund manager. They need to analyse macroeconomic conditions, the state of the stock market, shifts in markets, perform competitor analysis and examine the fundamentals of assets they have invested in. Fund managers take the help of various investment tools and software for such research.
After conducting thorough market research, the fund manager selects the best stocks, bonds or other financial instruments for a mutual fund. They make this decision based on the fund’s stated objective, investors’ expectations and applicable laws. They sell securities that do not belong in a fund’s portfolio and invest in new ones if needed.
Fund managers need to make sure that their investments deliver high returns while taking risks justified by the scheme’s objectives. That is why they regularly monitor a fund’s growth and performance and buy/sell securities to match the objectives.
The markets are unpredictable and subject mutual funds to certain risks. While some risks are unavoidable, a fund manager must safeguard his/her investors’ wealth and make sure not to overexpose investments. To control risks, fund managers may employ portfolio diversification, change asset allocation, conduct risk assessments, etc.
Mutual fund managers must work within the boundaries of government policies, investors’ interests and guidelines from regulators. Securities and Exchange Board of India (SEBI) regulated mutual funds in India. Fund managers must comply with all regulatory requirements for every area of an AMC’s business.
Fund managers also need to hire people to assist them on various matters like preparing annual reports, negotiating with brokers, etc. to be able to make the financial decision for their clients.
The following parameters will help you to choose the best fund manager:
An investor must know whether a portfolio manager has generated favourable returns over the past few years. Has the fund manager outperformed the benchmark consistently? How are the scheme’s returns across various market cycles? You can evaluate a portfolio manager’s performance through these questions.
An investor must know about a fund manager’s experience, qualifications and skills before taking the plunge. A well-experienced fund manager has already witnessed different market cycles and movements and understands how to handle adverse situations.
You can assess a portfolio manager on the basis of his/her investment style. Make sure to find out how a fund manager invests in funds. Investors can track whether the fund managers have an extensive cash balance or remain invested. Further, they can check if managers have unique investment strategies or imitate a benchmark portfolio.
Market research involves recognising favourable market opportunities and examining the patterns of other institutional players. Fund managers need to constantly track what the FIIs and DIIs are selling and buying to improve their funds’ performance.
An asset manager who can recognise an opportunity prior to the market has the potential to yield higher returns than others. So, go for the manager who can track shares ahead of his/her peers.
The following instances will make you understand how a fund manager decides where to invest:
Investing in mutual fund schemes managed by expert and well-informed fund managers can be profitable for investors. The investment strategies and expertise of these managers drive high returns for the investors. However, you must also consider the expense ratio, expertise and experience, the kind of funds they invest in and investment behaviour and other factors before choosing your portfolio manager. Visit Navi Mutual Fund to start investing today!
*Mutual Fund investments are subject to market risks, read all scheme-related documents carefully.
Ans: No, an Asset Management Company’s portfolio manager does not change often. He/she is the backbone of the strategy of a mutual fund scheme. If a fund manager changes, investment patterns and stock selection will also change.
Ans: Yes, portfolio managers are well-connected with investors. Fund houses have their own client relations cells, through which investors can ask questions and solve their queries related to the relevant mutual fund schemes. After all, fund managers are responsible for risk and liquidity management.
Ans: Fund managers identify assets and invest accordingly. Besides, they and their teams prepare periodic reports. These reports comprise information related to a fund’s performance and portfolio construction. Most investors choose mutual funds after gaining adequate knowledge about a fund manager’s expertise.
Ans: Yes, portfolio managers are responsible for managing the administrative and operating costs of a mutual fund scheme. Their investment decisions are highly dependent on these costs. In addition, they ensure substantial liquidity in a scheme.
Ans: Best fund managers impose reasonable fees for the management of a mutual fund scheme. Expense ratios for mutual funds are comparatively lower than charges of PMS (Portfolio Management Schemes). An expense ratio directly affects the returns of an investor. A high expense ratio minimises returns. However, the best managers justify these expenses with their stellar performance.
Illiquid Stocks Guide: Definition, Examples, and its WorkingIlliquid stocks are part of a long-term investment strategy that is appropriate for investors who a... Read More »
What is Shooting Star Candlestick Pattern in Trading?The shooting star candlestick pattern is considered to be a bearish reversal candlestick ... Read More »
What is VWAP Indicator and How to Use it for TradingThe VWAP indicator shows the volume-weighted average market price of a particular stock. You can us... Read More »
What is Price Action Trading: Its Strategy, Stop Loss and Profit TargetsPrice action trading is a methodology in which the trader solely relies on analysing a security’s... Read More »
What is Buy the Dip Strategy in Trading – Working and Example‘Buy the dip’ is one of the most common phrases in the stock market. It is sort of a go-t... Read More »
What is the Black Scholes Model – Formula, Calculation and AssumptionsAmong the important concepts in modern financial theory, the Black Scholes model, developed in 1973... Read More »
What is Iron Condor and What are its Strategies?Iron Condor is an options trading strategy that involves four options with the same expiration date... Read More »
What is Harmonic Pattern and How Does it Help in Trading?Harmonic patterns are one of the most efficient and effective trading patterns. Although they are m... Read More »
What is a Contract Note and Why is it Important?Contract note is a legal document containing the details of every stockbroker's trade on a stock ex... Read More »
What is K-shaped Recovery: Indication, Example andEconomies go through multiple phases in business cycles. One such phase is a recession which is mar... Read More »
Guide to Book Building – Its Types, Benefits and ProcessInitial public offerings (IPOs) are priced as specified by their underwriters. The process by which... Read More »
Support and Resistance in Trading: Working, Strategies, Uses and ExampleSupport and resistance are two of the most significant and practical concepts in technical analysis... Read More »
Top 10 Chit Fund Schemes in India in 2023Chit funds are one of the most popular return-generating saving schemes in India. It is a financial... Read More »
10 Best Gold ETFs in India to Invest in March 2023Gold ETFs or Gold Exchange Traded Funds are passively managed funds that track the price of physica... Read More »
10 Best Demat Accounts in India for Beginners in 2023Creation of Demat accounts revolutionised the way trades were conducted at the stock exchanges.&nbs... Read More »
20 Best Index Funds to Invest in India in March 2023What is an Index Fund? An index fund is a type of mutual fund or exchange-traded fund (ETF) that... Read More »
Best Arbitrage Mutual Funds to Invest in India in March 2023Arbitrage funds are hybrid mutual fund schemes that aim to make low-risk profits by buying and sell... Read More »
10 Best SIP Plans in India to Invest in March 2023What is SIP? SIP or Systematic Investment Plan is a method of investing a fixed amount in ... Read More »
10 Best Corporate Bond Funds in India to Invest in March 2023Corporate bond funds are debt funds that invest at least 80% of the investment corpus in companies ... Read More »
10 Best Bank for Savings Account in India 2023 – With Interest RatesSavings account is a type of financial instrument offered by several banks. It lets you safely depo... Read More »
All information is subject to specific conditions | © 2023 Navi Technologies Ltd. All rights are reserved.
Start Small. Dream Big.
Start your Investment Journey with just ₹10