The Role of a Fund Manager in Mutual Funds

Have you invested in mutual funds ever or are you new to investments? Whatever be the case, having a professional who can give you a hand in fund management is never a bad idea. Here comes the role of a fund manager.

The primary role of a fund manager is to handle the investment portfolio of investors for their financial growth and manage their portfolio actively or passively. A fund manager is also responsible for making investment decisions based on market research and analysis. Read further to learn more about the roles and responsibilities of fund managers in mutual funds.

About Fund Managers

Professionals with insights into financial markets, economic trends, international policies, and related subjects, are perfect for the role of fund managers. Notably, fund managers maintain different assets for an excellent portfolio. They are well-educated and hold years of expertise in market analysis. Their main motto is to overpower the performance of benchmarks and gain better returns on investments. A fund manager is also known to be the face of a mutual fund house.

Fund Manager: Roles and Responsibilities

As we have mentioned earlier, the critical responsibility of a fund manager is managing a fund’s portfolio and achieving its objectives. Given below are other essential duties of a fund manager.

Risk Management

A fund manager is liable for managing the risk involved in an investor’s portfolio. Fund managers ensure that the risk associated with the overall portfolio is aligned with the goals and mandate of the fund. Before putting any investment into various asset classes, they strive to assess the extent of risk involved in a portfolio and decide whether to invest in a particular asset class. Any decision associated with investment is taken with high precision. This is primarily because investors trust a fund manager to take care of their portfolios.

Ensure Compliance

SEBI (Securities Exchange Board of India) is accountable for creating mutual fund policies and rules. A fund manager must ensure that the fund, under his/her authority, does not infringe on any rule.

Implementing Relevant Fund Strategy

There are two types of fund management strategies: active fund management and passive fund management. In the case of actively managed portfolios, a responsive attitude is expected of a mutual fund manager, who constantly studies and analyses market trends. An active fund manager tries to remain one step ahead of the competition, anticipating future trends. The duty of a fund manager in managing funds passively is to meet the performance of a specific benchmark with minimal errors.

Selection of Securities

Making decisions about which securities must be held in the portfolio is one of the crucial responsibilities of a fund manager. He/she must conduct broad research before making such decisions. Fund managers may even require to replace securities in their portfolios with superior ones and, as a result, decide when to sell.

Track Fund Performance

A fund manager tracks the performance of funds regularly. Fund managers can also decide to exit securities that are underperforming. Their objective is to produce higher returns compared to the benchmark and peers.

Delegate

There are times when a fund manager must rely on a third party for expert guidance to deliver profitable outcomes for investors. Various minor tasks like accumulating investment, preparing annual reports, and coping with brokers are assigned to third parties. As they delegate these tasks, fund managers get more time to spend on market research and analysis.

Protect Your Investment

A fund manager can make or break your finances. They are majorly responsible for protecting investors’ money. Regardless of the possibility of profit, a fund manager should utilise safety measures when handling the wealth of an investor.

Meets Reporting Standards

Mutual fund managers should construct portfolio designs on the reporting standards outlined in regulations. The formation of any mutual fund considers the investor’s risks, goals, plans, policies, and expenses. A fund manager must inform the investor of the rules and see whether they are following them.

Parameters to Select the Best Fund Manager

You must consider the following parameters to choose the appropriate fund manager:

Experience

Before investing, an investor must know about a fund manager’s qualifications, skills, and experience. Opt for a fund manager with significant experience who has witnessed various market cycles and movements and knows how to deal with adversity.

Track Record and Performance

The investor should also be aware that the fund manager has produced favourable returns in the past. Before arriving at a decision, you can ask questions like has the mutual fund manager outperformed the benchmark unfailingly or how are the scheme’s returns across different market cycles.

Investment Pattern

Another way to see whether a fund portfolio manager is reliable or not is by assessing them on the basis of their investment pattern. As an investor, you must see how a fund manager invests in funds. You can track whether he/she has a vast cash balance or stays invested. In addition, you must check whether fund managers have the talent to form innovative investment strategies or mirror a benchmark portfolio.

Market Research Method

Recognition of profitable market opportunities and evaluation of the patterns of other financial institutions is a part of market research. A fund manager must consistently observe what other investors are buying and selling to enhance the performance of their funds.

How Do Fund Managers Decide Where to Invest?

Fund managers have vast experience and insightful perspectives. They gain valuable information from their research. Here are a few things that fund managers take into account to decide where to invest:

• They check the stock market for fluctuations to assess the extent of such fluctuations.
• They review industrial rivalry for assessing the macroeconomic forecast.
• They also conduct a deep analysis of the yearly performance of businesses wherein you can plan to invest.
• Before deciding on anything, the expertise of top management and directors is also considered along with the above-mentioned facts.