What is the role of a fund manager?

The last couple of years have seen fund manager churn as the competition heats up to gather assets. The fund manager is one of the key persons in the asset management industry and often the face of the fund house.

What is the role of a fund manager?
A fund manager is responsible for implementing a fund's investing strategy and managing its portfolio . A fund can be managed by one person, by two people as co-managers, or even by a team of three or more people. For actively managed mutual funds, the fund manager is basically in charge of stocks, bonds or other assets the fund will buy with the money given by investors. Essentially, the fund manager will function as a stock-picker. He is responsible to attain returns consistent with the level of risk for the particular scheme.

The fund manager monitors market, economic trends and track securities in order to make informed investment decisions. By functioning as the stock picker, the fund manager is responsible for making sure that the portfolio is ahead of its benchmark and peers.

What is the responsibility of the fund manager?
The fund manager is responsible for a fund's performance and he looks at optmising returns, while managing risks for the portfolio. He has to focus on quantitative parameter such as price-to-earnings ratios, sales, earnings, dividends and other parameters. He tracks financial results of the companies in the portfolio and its various metrics. He also decides which stocks will form part of the scheme and builds a portfolio of assets to accomplish the aims of the mutual fund. Operationally, in consultation with the investment team the fund manager is in charge of actually placing orders and buying/selling individual stocks/bonds from the portfolio as and when required.

How is a fund manager evaluated?
Financial planners, distributors and investors, all evaluate fund managers continuously. Amongst the quantitative parameters, they look at outperformance in relation to the benchmark, the returns in comparison to peer funds, ratios such as standard deviation, Sharpe Ratio, etc. In addition they also look at his investment style, fund management team. Many also see how much the fund manager has invested in the scheme he manages. For example, largecap funds having the Nifty as benchmark should be able to consistently outperform them over long periods of time.

Source:-Economic Times Bureau