Fund Manager: Who is Mutual Fund Manager & Roles of Fund Manager?

In the world of investments, building a portfolio also requires understanding the different options available and selecting the ones that align with your financial goals. It can be both an art and a science as it requires a careful balance of creativity and discipline and the ability to adapt to changing circumstances. This is why it's important to research and consider factors like risk, performance, and fees before making final decisions. If all this sounds like heavy lifting to you, you can start investing in mutual funds handled by professional fund managers who evaluate potential opportunities and select the right instruments for their funds’ portfolios.

Does this mean you don't have to spend hours reviewing financial reports and market data? A mutual fund manager does a lot more than that for you. Let us help you understand their role in a better way.

Who is Fund Manager?

A fund manager is a finance professional responsible for overseeing the management of a mutual fund, exchange-traded fund (ETF), or similar investment vehicle. Their day-to-day tasks involve making investment decisions on behalf of investors like you, selecting which securities to include in the fund's portfolio, and monitoring the performance of the fund's holdings over time.

The manager of the mutual fund scheme you select will ensure that the fund stays true to its investment objectives and adheres to any investment guidelines or restrictions. This includes considering risk, diversification, and liquidity factors and ensuring that the fund's investments align with your goals and preferences.

Consider a mutual fund as a collection of different investments, like stocks, bonds, and other securities. The fund manager's job is to select which securities to include in the fund's portfolio and monitor their performance. This means keeping up with market trends, analysing financial reports, and adjusting the fund's holdings as needed.

Roles of Fund Managers

The fund manager is essentially the team's Captain, calling the plays and ensuring the fund moves towards fulfilling its investment objectives. He/she plays the following roles:

1 Investment Decision Making

Mutual fund managers are responsible for selecting the securities to be included in the portfolio and deciding when to buy or sell the same. They work on balancing risk and return while aligning with the fund's core objectives.

2 Staying Informed about Market Trends

To make informed investment decisions, they need to stay on top of market trends, economic indicators, and company financial reports. They must also analyse complex data and information and deeply understand the financial markets.

3 Reacting to the Market Dynamics

Mutual fund managers also need to respond quickly to changes in the market and adjust the fund's holdings as needed. This requires the ability to anticipate market trends and make strategic decisions to position the fund for success.

4. जोखिम प्रबंधन / रिस्क मैनेजमेंट

A fund manager is also responsible for managing risk. They use techniques such as diversification, asset allocation, and hedging to minimise the impact of market volatility on their client's portfolios.

5. अनुपालना

They need to comply with various regulations/laws and maintain accurate records to ensure that they act in their investor’s best interests and avoid conflicts of interest.

Active Vs. Passive Fund Managers

There are pros and cons to investing money in both aggressive and defensive approaches. Investors have a choice between two types of fund management styles: active and passive. The main difference between these two approaches is how the investment portfolio is managed. A fund manages passively by a Fund manager will track a specific market index, such as Nifty 50, and aim to match its performance. In contrast, a fund managed actively by a Fund manager will use their investment expertise to pick and choose specific stocks, follow a benchmark index and aim to outperform the market.

Here are some of the key differences between active and passive fund managers:

1 . Fund Management Fees

Funds managed actively by Fund Managers, typically have higher expense ratio than funds managed passively because of the higher costs associated with research and analysis.

2. परफॉरमेंस

Active mutual fund managers aim to outperform the benchmark, but success depends on their skills, decisions, and market conditions, amongst many other aspects. On the other hand, passive fund managers aim to match the benchmark, which may be a more consistent approach, but they may miss out on opportunities to outperform.

3. जोखिम

Active fund managers take on more risk by investing in specific assets, which can lead to higher returns but also greater losses. Passive fund managers aim to minimise risk by tracking a specific index, which can lead to more stable returns.

Additional Read: What is Fund Fact Sheet?