The Job Of A Portfolio Manager Demystified
A portfolio manager is a person who is responsible for investing clients’ money, implementing investment strategies, and monitoring the performance of the portfolio to meet his or her clients’ financial objectives. A large part of a portfolio manager’s day-to-day may include closely following financial markets and current events, conducting fundamental analysis on prospective and existing holdings, and deciding whether to continue to hold an investment, buy more of a current or new investment or sell an investment.
When it comes to selecting an investment management firm to manage your money (or your client’s money in the case of family offices), the portfolio manager is an important consideration as he or she has a direct impact on the performance of your portfolio. This article takes a comprehensive look at the day-to-day responsibilities of what a portfolio manager does which will provide you with a better understanding of how to evaluate portfolio managers.
What Is A Portfolio?
We know that a portfolio manager manages portfolios, but what exactly is a portfolio? A portfolio is a basket of assets that can include stocks, bonds, cash, cash equivalents, and more. There are many different types of portfolios, such as a portfolio that only holds real estate investment trusts (REITs).
You can also have personalized portfolios which are created and managed specifically based on your financial objectives and investing preferences. A client seeking a portfolio that provides capital gains and stable cash flow may want to seek a portfolio manager who routinely constructs portfolios comprised of certain investments assets such as dividend-paying equities, REITs, and income trusts. Understanding the type of investments in which a portfolio manager specializes is important in order to have a complete understanding of, and trust in, your investment manager.
What Does A Portfolio Manager Do?
A portfolio manager is typically responsible for all aspects of an investment portfolio. This includes everything from developing an investment strategy to meet the client’s financial objectives, to implementing that strategy by selecting an appropriate mix of investment assets, and finally, managing the portfolio on a continuous basis to make buy, hold and sell decisions when appropriate. The portfolio manager is also responsible for providing statements to their clients on a regular basis, showing the portfolio’s contents, valuation, performance and more.
Another way to look at portfolio managers is to think of them as risk managers. They are responsible for ensuring that the portfolio reaches its financial objective while assuming the right level of risk—not too much, not too little. Depending on the client’s objectives, too much risk can be viewed negatively if it results in a loss of capital.
Too little risk can also be viewed negatively depending on the client’s objectives as it can indicate that that the portfolio manager is not adding value and is not reaping the higher rewards that can come from higher risk. This is very important. At the end of the day, the value of hiring a portfolio manager is so that the client can have comfort that their money is invested using the appropriate risk level to attain the financial objectives identified at the onset .
Lastly, what many people do not realize is that the role of a portfolio manager is multi-faceted. The job does not simply involve looking at charts and reading financial reports and press releases but also involves having relationships with sales and trading departments, meeting with senior leadership of current and potential investee companies and, of course, meeting with clients to review their portfolios.
Portfolio managers need to have very specific qualities to stand out from the crowd. The ability to develop investment strategies and to execute excellent research skills are just two important factors that you should look at to evaluate a portfolio manager.
Bloom Investment Counsel, Inc. is a well-established Toronto-based independent, privately-owned boutique investment management firm providing customized, actively managed, Canadian and U.S. dividend-paying portfolios for wealthy individuals, family offices, foundations, corporations, institutions and trusts.
Founded in 1985, Bloom has experience in managing in excess of $2.5B in assets over the years. We believe that generating independent cash flow is central to the success of our clients’ portfolios because it provides capital for the present day, if needed, while continuing to preserve and build wealth for the future.
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This content is provided for general informational purposes only and does not constitute financial, investment, tax, legal or accounting advice nor does it constitute an offer or solicitation to buy or sell any securities referred to. Individual circumstances and current events are critical to sound investment planning; anyone wishing to act on this content should consult with his or her financial partner or advisor.