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What Does a Portfolio Manager do?

Posted on November 6, 2018 11:07 am;

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Portfolio management is mainly concerned with investment in the securities industry. Through the collection and analysis of data appertaining to the financial performance of a range of public companies, the portfolio manager provides the best investment advice. The most common process used by portfolio managers usually follows an established six step system.

Determination of objectives

From single clients to large investment corporations, the portfolio manager follows the same principle which is to determine the client’s objectives and risk parameters. It follows, of course, that larger clients are likely to be utilizing larger budgets across varied investments.

Making optimal asset class choices

From equities and bonds to real estate and private equity options, the portfolio managers remit includes the next step which involves making the best choices for the nature of the client’s investment. This is likely to be tied into step one where the goals and expectations of the client’s investment are set out.

SAA or Strategic Asset Allocation

The next step in the process applied by the portfolio manager is setting the proportion of the client’s investment capital against the different assets. This will most likely be carried out at the start of the investment period to ensure that the portfolio matches the client’s risk and return goals. Balancing of these “weights” as they are often called may also be required further into the investment period and any gains may also be redistributed in this way too.

Tactical and insured asset allocation

The process of making changes during the investment period falls into either tactical or insured asset allocations (TAA and IAA). The portfolio manager may choose to utilize either of these options but never both at the same time. This enables the manager to provide some predictions that may protect the investments if values fall below a predetermined level or “floor”. information.

Risk management

The portfolio manager is responsible for minimizing the client’s risk and they achieve this by setting “benchmark” returns from historical market data and avoiding the high risks of the market’s volatility.

Performance measurement

With the use of established tools and methods, the portfolio manager will be constantly monitoring performance and using the results to make adjustments throughout the client’s investment cycle. Many of the investment industry’s classic calculating methods are also built into the latest technology and software so portfolio managers will also make use of a high level of IT skills. For more information about accreditations in the finance space, take a look at the Morgan International website.

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