What does a portfolio manager do, and what are their primary skills?

The portfolio manager is one of the most important financial professionals in the industry.

The financial sector is full of different types of professionals, each focused on a specific area and capable of mastering various tools and skills. One of the most important is the portfolio manager.

What is a portfolio manager?

A portfolio manager, also known as a portfolio administrator or portfolio manager, is a professional in the financial sector who manages investment portfolios, usually within a fund manager or bank, based on the needs and objectives of individual or institutional clients.

What is the role of a portfolio manager?

The functions and tasks of a portfolio manager depend on the portfolio manager’s experience, field of expertise, and assets under management. However, most share some activities:

  • Determine the investment strategy based on client objectives and needs.
  • Regularly monitor strategies and order or execute adjustments when necessary.
  • Contacting research departments to learn which assets are ideal for following the plan.
  • Be informed about market movements to seek and find investment opportunities.

Types of portfolio managers

Currently, there are two major groups of portfolio managers, which differ from each other according to the investment strategy applied:

Active portfolio manager

This professional will be in charge of active strategies to beat the market, that is, outperforming a benchmark index through purchasing and selling assets, including financial derivatives.

Passive portfolio manager

In contrast, a passive specialist organizes an investment plan to replicate a particular index, such as the S&P 500. These professionals excel within the index fund industry.

The skills of a portfolio manager

To perform properly, a portfolio manager must have a series of financial and economic knowledge but also some almost essential skills and qualities:

Analytical ability

When making investment decisions and putting together financial strategies, a portfolio manager must correctly evaluate the various alternatives available and rightly interpret the clients’ objectives and needs. If any of these factors fail, then the results may be unfavorable.

Monitoring emotions

When managing third-party money and constantly exposed to market volatility, the portfolio manager must be able to control their emotions so as not to make irrational decisions based on feelings, which can jeopardize the strategy.

Transparency

Like any other type of professional, no matter what field they belong to, a portfolio manager must be transparent and honest, especially when informing about how the money will be managed. Clients need to know what will happen to their investments.

Communication

Having to make presentations and talks about the strategies he will carry out, the portfolio manager must master the art of communication, being able to convey simply some complex concepts.

How to become a portfolio manager?

There is no magic formula or recipe for becoming a portfolio manager, let alone a good one. In some cases, the professional does not have a university education but has decades of experience in the industry. In other cases, the specialist has little experience but a lot of intellectual capacity and qualifications. And sometimes, the portfolio manager combines both qualities.

Nowadays, young people who aspire to become portfolio managers choose to pursue an undergraduate degree in economics and finance, then a specialization. Finally, an international certification validates their knowledge, such as Chartered Financial Analyst (CFA) or Certified International Investment Analyst (CIIA).

It is also important to have a solid network of contacts made up of professionals, specialists, and executives from different areas of the financial sector. In this way, it will be possible to obtain recommendations that validate the trajectory so that getting a job as a portfolio manager is less challenging.

The role of a portfolio manager is becoming increasingly important, and knowing what it is and what skills are necessary to work as a portfolio manager will serve to grow within the financial industry.

Authored by
FlexFunds

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