In India, there are two kinds of mutual funds that you can invest in - an actively managed fund or a passively managed fund. In the case of an actively managed fund, the fund house generally appoints an experienced individual to ensure that the fund performs in a manner that adheres to the stated objectives. This individual is known as the fund manager and is tasked with a host of other duties as well. Continue reading to find out everything about who is a fund manager and their roles and responsibilities.
Who is a Fund Manager?
As you’ve already seen, a fund manager is an experienced individual tasked with the primary responsibility of managing the fund portfolio. Generally, most mutual funds appoint only a single fund manager to oversee the mutual fund. However, there are a few funds that employ multiple individuals as a team to manage the fund.
The fund manager, through his investment decisions, ensures that the mutual fund satisfies the investment objectives. The manager’s actions greatly influence the performance of the mutual fund.
The fund manager is paid a percentage of the mutual fund’s average Assets Under Management (AUM) for the services they provide. The expense ratio that the fund house levies usually covers the manager’s cost.
What are the Responsibilities and Duties of a Fund Manager?
Now that you’re aware of who a fund manager is, let’s take a look at the roles and duties that they’re expected to fulfill.
1. Conducts Extensive Research and Analysis
One of the primary duties of a fund manager is to conduct a thorough fundamental and technical analysis of various assets. This extensive research and analysis exercise conducted by the manager allows them to determine the right kind of assets that the fund needs to invest in to fulfill its objectives.
2. Makes Important Investment Decisions
The manager is responsible for taking all of the investment decisions involving the mutual fund. This includes picking the right assets and allocating the appropriate amount of funds to each asset.
3. Manages Trading Activities
This is another one of the fundamental duties of a fund manager. Every mutual fund regularly purchases and sells the assets in its portfolio based on the performance and market outlook. The fund manager is responsible for all the purchases and sales of the mutual fund assets.
4. Implements Investment Strategy
Every mutual fund has a strategy that has to be followed. The fund manager ensures that the investment strategy for the respective fund is followed at all times without any deviations whatsoever.
5. Monitors the Portfolio Regularly
The fund manager is also tasked with the responsibility of regularly monitoring the mutual fund portfolio. The constant monitoring of the fund allows the manager to take corrective action early on. In addition to tracking the fund’s performance, the manager also periodically rebalances the portfolio by buying and selling securities.
6. Keeps an Eye on Global Economic Events
Since global events influence financial markets a great deal, the fund manager is required to keep a close watch. In the event of any untoward economic or political incidents, they take investment decisions quickly to reduce the negative impact on the portfolio.
7. Ensures that the Investors’ Assets are Protected
One of the primary duties of a fund manager is to protect the assets of the investors. The manager does this through various ways such as portfolio diversification, changing asset allocation and assessing investment risk, among others.
8. Ensures Regulatory Compliance
Mutual funds in India are heavily regulated by the Securities and Exchange Board of India (SEBI). The independent regulatory authority requires mutual funds to adhere to a certain set of guidelines and meet all the reporting requirements. The fund manager takes care of all of these activities and ensures that regulatory compliance is always on point.
Conclusion
The importance of a fund manager in an actively managed mutual fund cannot be stated enough. If you’re planning to invest in a mutual fund in the future, remember to also evaluate the fund manager. Take a look at their credentials, experience, track record, investment pattern and the way they go about market research before you decide to invest in a mutual fund.
That said, investing in a mutual fund requires you to first have an active demat account in your name. You can quickly open a demat account and a trading account by visiting the website of Motilal Oswal. All you need to do is fill out and submit an online application along with scanned copies of relevant documents. After due verification, your account will be opened and you can proceed to invest in mutual funds or upcoming IPOs of your choice.