What to Know Before You Become a Portfolio Manager

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 a person must work their way up to over the course of a career, there are some parts of the job you should know before you consider moving up to managing a portfolio.

Background of Portfolio Managers

If you are still an undergraduate student who is considering a career as a portfolio manager, take courses in business, economics, finance, accounting, and math. An MBA degree, in addition to an undergraduate degree, is borderline essential. Private investment firms or investment banks look favorably on time spent studying risk management, accounting, and finance. Some master's programs offer stock-market-specific courses.

Within a firm, portfolio managers are often promoted from the rank of research analyst after working in that position for two to four years. Working as an analyst is great training 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.

Types of Portfolio Manager Positions

There are a wide variety of positions within the realm of portfolio manager. The positions depend on the following criteria:

  1. 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 with a large endowment, such as a college or university.
  2. 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 college is commonly referred to as a chief investment officer (CIO).
  3. 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.
  4. Investing style: In addition to specializing in equity- or fixed-income investing, portfolio managers tend to specialize when it comes to styles of investing. Investment styles include: hedging techniques, growth or value style of management, small or large cap specialties, and domestic or international fund investing.

Licensure and Certification

Working in portfolio management requires professional licenses from the Financial Industry Regulatory Authority (FINRA). The specific set of FINRA licenses vary based on the types of securities and other investment assets.

Portfolio managers, as opposed to fund managers, often assume control of very large portfolios for major financial institutions. If your potential job involves asset management exceeding $25 million, you will be required to register with the Securities and Exchange Commission (SEC).

For aspiring portfolio managers, the most important qualifications are professional certifications. With sufficient past experience, the best option might be a chartered financial analyst (CFA) designation. Other certifications—assuming they are related to economics, finance, investing or accounting—can bolster a resume, but are no guarantee. As is unfortunate with many other positions, the game can be more about who you know that what.

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 the team of analysts to discuss market developments and the trends of relevant current events.

A portfolio manager directs all of the trades the investment fund or portfolio makes during the day by making final decisions on the securities involved. They also meet with analysts who have conducted research on various securities and the institutions that issued them. Based on their recommendations, the portfolio manager makes the ultimate decision on 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 and 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.

The Bottom Line

A day in the life of a portfolio manager is filled with challenges, but also offers a financial and intellectual reward. It begins early and often ends late, but in between 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.

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