Ben Waters, trader, is an experienced equity, Delta One and options trader. In addition to managing his own extensive asset portfolio, Benjamin Waters, trader, also formulates and implements investment strategies for third parties as a portfolio manager. This article will look at the role of portfolio manager, providing an overview of the key responsibilities involved and the skills required to help clients manage their investments effectively and achieve their financial goals.
Portfolio managers are professionals operating in the financial services industry that are responsible for making investment decisions for institutional and/or individual investors. The role involves developing and implementing investment strategies, as well as managing the day-to-day trading of portfolios.
A portfolio manager may be responsible for managing the assets of either an institutional investor, such as a mutual fund, or the portfolios of individual investors. The position involves creating and implementing various investment strategies, such as value investing, diversification, buy and hold, indexing, small-cap, active investing, passive investing and contrarian investing.
Portfolio managers construct and curate portfolios based on their investment style. The portfolio manager’s ultimate goal is to maximise returns while minimising losses. To achieve this requires careful research, adjusting portfolios at regular intervals through rebalancing and communicating with investors. Portfolio managers hold great sway over investment funds, be it a hedge fund, ETF, venture capital fund or closed- or open-ended fund.
Decisions made by the portfolio manager directly affect fund returns. It is therefore essential for investors to recruit a portfolio manager with a strong background in financial management. Typical candidates include experienced traders, brokers or investors with a proven track record of sustained success. Portfolio managers may find themselves working with individual clients for private wealth management companies, conducting research as associates or directing investment teams at mid-senior level. Senior portfolio managers often work with closely with the chief investment officers of their funds. Depending on where they work, portfolio managers may be remunerated via a base salary, bonuses and commissions.
Irrespective of their educational or professional background, portfolio managers fall into two categories: passive and active. If a portfolio manager implements a passive approach, their investment strategy will largely mirror a specific marketing index, using that as a benchmark to provide the investor with similar returns in the long run, adopting a hands-off approach. Active portfolio managers, on the other hand, invest proactively, continuously attempting to achieve better-than-average market returns. This requires a great deal of experience and attention, buying and selling regularly to achieve optimal fund returns.
Investment strategy is front and centre to the role of portfolio manager. Essentially, investment strategy is a set of principles that enables the portfolio manager to achieve their investment goals. Weighing up a variety of different factors – including risk tolerance, investment goals and timeframe – investment strategies can vary significantly from one to the next, ranging from the ultra-conservative, following a low-risk strategy focussing on wealth protection, to the highly aggressive investment strategy, focussing on capital appreciation and rapid growth.
For investors keen to enlist the help of a seasoned professional to grow their assets and help them achieve their financial goals, choosing the right portfolio manager is crucial. With so many portfolio managers on the market, investors have a great deal of choice in terms of investment strategies and styles.
The overarching goal for any investor should be to achieve a sufficiently diversified portfolio capable of optimising risk and returns over the relevant time period while simultaneously meeting ongoing cash and liquidity needs. Although individual investors may struggle to determine and achieve optimal asset allocation, enlisting the help of a seasoned portfolio manager increases access to the right stocks, bonds and ETFs, as well as providing the benefit of a wealth of knowledge, skills and access to data.