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A Portfolio Manager is a professional who is responsible for making investment decisions and carrying out investment activities on behalf of individuals or institutions. These clients have invested their money into the portfolio manager's investment policy in order to invest for future needs e.g. fund for retirement needs/future liabilities or to meet the ongoing needs e.g. an endowment fund to fund current university needs. The clients have placed invested money under his or her control or a person who manages a financial institution's asset and liability (loan and deposit) portfolios. On the investments side, they work with a team of analysts and researchers, and are ultimately responsible for establishing an investment strategy, selecting appropriate investments and allocating each investment properly for an investment fund or asset management vehicle.
The goal of an investment manager is to earn a greater return than the given level of risk, this return is can be monitored by clients/investors as the manager's performance on a timely basis e.g. weekly/monthly/yearly performance presented by the reporting and financial statements. To track performance, a manager may benchmark or track their investment strategy alongside an index.
Clients are the investors in a portfolio manager's investment policy which outlines details of how to invest such as minimum investment requirements, liquidity provisions, investment strategy and markets the manager will be actively investing in. Institutional investors include Fund of Hedge Funds, Insurance companies, Endowment funds and Sovereign Wealth funds. Individual investors include Ultra-High Net Worth Individuals or High Net Worth Individuals (UHNW & HNW).
Team: Portfolio Managers & Investment Analysts
Portfolio managers are presented with investment ideas from internal buy-side analysts and sell-side analysts from investment banks. It is their job to sift through the relevant information and use their judgment to buy and sell securities. Throughout each day, they read reports, talk to company managers and monitor industry and economic trends looking for the right company and time to invest the portfolio's capital.
A team of analysts and researchers are ultimately responsible for establishing an investment strategy, selecting appropriate investments and allocating each investment properly for a fund or asset-management vehicle.
Portfolio managers make decisions about investment mix and policy, matching investments to objectives, asset allocation for individuals and institutions, and balancing risk against performance.
Portfolio management is about strengths, weaknesses, opportunities and threats in the choice of debt vs. equity, domestic vs. international, growth vs. safety, and other tradeoffs encountered in the attempt to maximize return at a given appetite for risk.
In the case of mutual and exchange-traded funds (ETFs), there are two forms of portfolio management: passive and active. Passive management simply tracks a market index, commonly referred to as indexing or index investing. Active management involves a single manager, co-managers, or a team of managers who attempt to beat the market return by actively managing a fund's portfolio through investment decisions based on research and decisions on individual holdings. Closed-end funds are generally actively managed.
The IT Infrastructure for a portfolio manager facilitates the delivery of updated prices and market information to allow for trade orders, trade executions and their overall portfolio value. The IT infrastructure, as known as a portfolio management system (PMS) include components such as an order management system, execution management system, portfolio valuation, risk and compliance. A front-back PMS will also include middle office and back office components such as trade management, pre/post-trade tools, cash management and Net asset value calculations.
- Conroy, Robert M. (2014). CFA Institute Level I: Corporate Finance & Portfolio Management. p. 237.