The role of a Fund Manager in the Mutual Fund scheme


A fund manager is who manages the core portfolio

Investors need to review the managing style of fund managers

The fund manager is considered to be the most crucial element in successful mutual fund investment. AMCs rely upon the experience and track record of a fund manager to sell their funds. The fund manager either makes or breaks your investment.

Who is the fund manager?

A fund manager is who manages the core portfolio comprising of stocks and bonds and other assets. The ways the manager performs his duty have a significant impact on the stock performance for both the short and long run.

The fund managers are mostly highly educated, have professional credentials, and hold management experience. Besides extensive knowledge on the subject, they need to have relevant market insights and an eye on the economic trends and policies.

Mutual funds can be managed by one person, or by two as co-managers, or by a team consisting of three or more people. Fund managers are paid a percentage of the fund’s average assets under management (AUM) as a fee for their work.

Investors need to review the managing style of fund managers to ensure that their money is in the safe hands of an expert before investing in a fund.

The role of fund managers

The fund managers play a very vital part in the performance of an active mutual fund.

The fund manager’s role can be active or passive

Active Managers or alpha managers are managers who are actively engaged in fund management. They study the market trends, analyze economic data, and stay updated on company news. They buy and sell securities, stocks, bonds, and other assets based on their study, to earn greater returns.

Active fund managers are highly trained to play a more proactive role in their funds by changing their holdings constantly in their effort to outperform their peers and the benchmark indexes. As these fund managers generally charge higher fees, the fees of mutual funds that are actively managed are usually high.

Passive fund managers trade in securities that are given in a benchmark index. They choose securities for the portfolio as per the underlying index. Instead of putting their efforts to outperform the index, they usually try to get the mirror effects. As it doesn’t involve much expertise on the part of the fund manager, fees are comparatively less. Many exchange-traded funds and index mutual funds are managed passively.

The duties performed by a fund manager

The Fundamental Duties

The fund manager’s responsibilities include the implementation of the investment strategy of a fund and managing its portfolio of trading activities. They oversee mutual funds, manage analysts, conduct research, and make important investment decisions. The fund managers make decisions related to buying and selling wealth based on their research and analysis.

Meeting Regulatory Guidelines

Mutual fund managers design funds keeping the reporting standards of the regulatory guidelines in mind. They also take into account the objectives of the investors, the strategies, risks, expenses, and various policies. Fund managers ensure that documents are furnished on time following the laws and regulations and also that investors are aware and abide by these details and rules.

Compliance

The fund manager handles funds as per the rules laid down by the regulator, the Securities and Exchange Board of India (SEBI), and authorities, including various aspects ranging from signing clients to the handling of redemptions.

Wealth Protection

The fund manager protects the wealth of the investor. The mutual funds are subject to market risks. Therefore they do extensive research, use state-of-the-art risk management techniques to evaluate the investments, and make decisions regarding the buying and selling of wealth for generating returns and growth. If required, they employ investigations into the company in question. The fund managers also ensure that the portfolio is adequately diversified.

Fund Monitoring

The essential duty of fund managers is to monitor the performance of the fund in the market. The team of researchers and analysts who keep a close watch on markets and companies assist the managers. The decisions of the manager related to funds are based on this observation. The investment decision of the investors is ultimately based on the performance of the fund managers and how they bring growth against the force of interest and inflation rates.

Supervision

The fund managers need assistance from various professionals and even firms to deliver successfully. The duties of generating annual reports, arranging capital, dealing with brokers, etc. are given to third parties. They also transfer some of the compliance-related responsibilities to a third party. However, the ultimate responsibility goes to the fund manager.

How do fund managers decide on investment?

Fund managers hold comprehensive knowledge on the subject along with far-reaching insights. Besides, they gather essential insights from the research team to analyse the competition in the industry and get a broader macroeconomic outlook. The in-depth analysis of the yearly outcome of the companies is conducted before investing in them. The fund manager has to check the shifts in the stock market to analyse the volume of the shifts and navigate risks such as market risks, business risk, currency risk, etc. There are various market parameters on which the manager has little or no control. Therefore, the fund manager also considers the view of experienced top managers and directors before making investment decisions to ensure both the protection and growth of the investor’s money.

Concluding note…

Now the big question is whether you can assess risk and evaluate stocks the way fund managers do. The answer is “No”, as you neither have access to such information nor do you have the expertise and qualification to make decisions keeping in mind all the related factors. Therefore, take the help of your advisor to decide and get the desired result.

That’s why Comparte Investment team asks do you have “Nivesh Ki Aadat”.

With this one can say “Mutual Fund Sahi hai”, so let me do Nivesh / Enquire