One of the most coveted careers in the financial industry is that of the portfolio manager. Portfolio managers work with a team of analysts and researchers, and are ultimately responsible for making the final investment decisions for a fund - or asset-management vehicle. While a portfolio manager is a position that a person must work his or her way up to over the course of a career, there are a few initial steps that you can take to help you on your way to being a portfolio manager.
Background of Portfolio Managers
If you are still an undergraduate student who is considering a career as a portfolio manager, it is advisable to take courses in business, economics, accounting and math. Many portfolio managers also have an academic background in computer science, engineering, physics or biology. An MBA degree, in addition to an undergraduate degree, is also a popular among portfolio managers.
A professional designation many portfolio managers also possess is the Chartered Financial Analyst (CFA) charter. In order to achieve this designation, candidates must demonstrate a proficiency in financial and accounting terms and techniques, economics and quantitative analysis, as well as prove the required work experience. (For related reading, see What Does "CFA" Mean?)
Within a firm, portfolio managers are often promoted from the rank of research analyst. Working as an analyst is a great training ground for becoming a portfolio manager. It provides a framework for making crucial portfolio decisions, such as buying or selling a security, and determining the underlying economic conditions that affect those securities. Even if you have yet to enter a professional environment, you may want to begin by picking and choosing stocks in a mock portfolio club/online simulator. (Trade $100,000 of virtual cash in our Investopedia Simulator.) Such an experience will give you a good idea of what being a portfolio manager is truly like. (To learn more, read Becoming A Financial Analyst.)
Types of Portfolio Manager Positions
There is a wide variety of positions within the realm of portfolio manager. The positions depend on the following criteria:
- Size of Fund: A portfolio manager may manage assets for a relatively small independent fund or a large asset management institution. A portfolio manager may also manage the capital of a large business such as a bank or an organization that has a large endowment, such as a college or university.
A manager who manages assets for a large money management institution is commonly referred to as a portfolio manager, while someone who manages smaller fund assets is typically called a fund manager. Someone who manages assets for a large business organization or a college is commonly referred to as a chief investment officer (CIO).
- Type of Investment Vehicles: All types of money managers perform virtually the same function: managing assets for their respective investment vehicles, which vary widely. The range of investment vehicles includes retail or mutual funds, institutional funds, hedge fund products, trust and pension funds, and commodity and high net worth investment pools. Portfolio managers may manage equity or fixed-income investment vehicles and often specialize in one or the other.
- Investing Style: In addition to specializing in equity- or fixed-income investing, portfolio managers tend to specialize when it come to styles of investing. The range of investment styles includes using hedging techniques, a growth or value style of management, small or large cap specialties and domestic or international fund investing.
A Day in the Life of a Portfolio Manager
Although a day in the life a portfolio manager is diverse, one constant is checking the status of the financial markets and staying on top of current events. A portfolio manager will meet regularly with his or her analysts in order to discuss market developments and the trends of relevant current events. Since a portfolio manager's day is dictated by the start of the financial markets, they generally tend to be one of the very first employees into the office in the morning. (For more insight, see Short-, Intermediate- And Long-Term Trends.)
A portfolio manager directs all of the trades the fund or portfolio makes during the day by making final decisions on the securities involved. He or she meets with analysts that have conducted research on various securities and the institutions that have issued them. Based on their recommendations, the portfolio manager makes the ultimate decisions of what securities to buy or sell. Some asset management styles, such as growth portfolios or funds, have a higher security turnover than others, such as value management.
In addition to meeting with the analysts on staff and monitoring the markets and current events, a portfolio manager has many other responsibilities. Portfolio managers often meet with high-level investors, or potential investors, in person or over the phone. In addition, portfolio managers of large funds often conduct interviews with the financial media such as The Wall Street Journal, The Financial Times or CNBC. While they often only give an overview of current economic conditions, appearing in the financial media provides publicity for the investment vehicles they manage as well as the firms they represent. (Find out whether your advisor is a league leader or a benchwarmer, in Does Your Investment Manager Measure Up?)
All in a Day's Work
A day in the life of a portfolio manager is filled with challenge, but also offers financial and intellectual reward. It begins early and often ends late, but in-between those times lie many interesting challenges and opportunities. If you are highly analytical and have a love of the financial markets and the ever-changing world of current events, a career as a portfolio manager may be for you.