What is the role and responsibility of a fund manager ? (2024)

A fund manager is one of the key persons in a fund house, and s/he builds the portfolio and continuously monitors it, and ensures it runs in line with the objectives and mandate of the fund.

Who is a fund manager?

A fund manager is an investment expert responsible for managing the scheme’s investing strategy. Every scheme is managed by one or two fund managers, while in some cases where the scheme is huge or has more than one asset class, it would have more than two people.

What is the role and responsibility of a fund manager?
A fund manager has several functions among which the major ones are building the portfolio, making decisions on what to buy or sell, and continuously analyzing the markets and sectors. He is also supposed to deploy money as and when inflows come into the scheme and manage redemptions as and when there is a request for the same. Since the fund manager is responsible for the success of the fund, they also research companies, meet management, and study the financial industry and the economy. The fund manager is also accountable for managing the overall risk in the portfolio in line with the fund’s objectives. Fund managers also regularly track the performance of schemes and decide to exit underperforming stocks or add those that can generate alpha, so that they can generate higher returns than the benchmark and beat their peer funds. They need to ensure compliance in line with guidelines for mutual funds and ensure the scheme does not violate any regulations. A fund manager is also responsible for managing a team of analysts and guiding them on their respective sectors.

What is the difference between active and passive fund managers?

Active fund managers will try to outperform their peers and the benchmark indices. They analyze companies and change portfolios dynamically. These fund managers generally charge higher fees because they take on a more proactive role in their funds by constantly changing their holdings. Passive fund managers trade securities that are held in a benchmark index. Rather than trying to outperform the index, passive fund managers try to mirror its returns. Fees for passive funds are much lower in passive funds.

How is a fund manager compensated ? How does his career progress?

A fund manager’s job is one of the most sought-after jobs in the mutual fund industry. In terms of educational qualifications most of them could be engineers or hold a postgraduate degree in management. They could also be chartered accountants or chartered financial analysts. While they earn a fixed salary, they are also compensated based on performance of the scheme and earn a performance bonus. The performance bonus could be a function of assets under management and returns earned by the schemes. Some organizations also compensate them by way of stock options. A fund manager could progress to a chief investment officer or even the chief executive officer in an organization.

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