The role of a Portfolio Manager and how to break into the industry?

What does a “Portfolio Manager” do?

The Portfolio Manager job title is one of the most desired in the financial services industry. It is a role that can be very interesting and dynamic, but also quite demanding in terms of knowledge, time commitment and has very high entry requirements. Portfolio managers are responsible for the management of clients’ funds (these could be retail, high net worth, or institutional). They are in charge of the investment management process – from idea generation and security selection to the ongoing monitoring of investment portfolios. Typically, a portfolio manager would head up a team of investment analysts who feed ideas into the process and support the investment decision-making by producing in-depth reports and proposals.

Types of Portfolio Managers

Portfolio managers could work for a variety of institutions, for example:

• Asset management companies
• Banks
• Insurers
• Pension funds
• Wealth management
• Endowments
• Hedge funds
• Private equity
• Sovereign wealth funds

Usually, a portfolio manager would have a specific area of focus, on an asset class or geography level, where he/she has a strong knowledge and experience. In addition to that, portfolio managers are also focused on staying up to date with current regulations that might impact their strategy.

Example

George is a portfolio manager for ABC Asset Management and runs a fund investing in Large Cap UK Equities. His objective is to deliver returns for his clients in excess of a predetermined benchmark index (for example the FTSE 100) over a specific time frame. He is in charge of shaping the investment strategy for the fund, what is going in and out of the portfolio as well as managing the investment risk.

Career Path

Becoming a portfolio manager would normally require gaining a lot of experience within a specific area of the market – in this case, large-cap UK equities. A typical career path starts with becoming a junior investment analyst after graduating from university. After several years of experience,  junior analysts typically progress to an investment analyst position and their duties will also grow. While juniors play more of a support role, investment analysts are those who advise portfolio managers and provide ideas for inclusion in the portfolio. Then, the next step for an analyst would be to step up to become a deputy portfolio manager or a co-manager and assume more responsibility for the portfolio. The entire process can take many years of hard work. Portfolio managers would have normally spent at least a few years as an analyst within the team before getting the offer of a promotion.

It should however be acknowledged that in the investment management industry there is not a universal career path structure (like in investment banking) and team structures could vary widely from one company to another.

Also, it should be noted that often teams need to work together (at whatever seniority level) to collaborate and ensure they are all following the same investment ethos and style. By working as a team and regularly sharing ideas, updates, and financial models, a firm can ensure that the portfolio manager is creating a consistent investment strategy and any succession of roles will continue this style.

Education and Qualifications

Portfolio managers are usually highly qualified and hold a number of qualifications alongside their academic degrees. A Bachelor’s degree in finance, economics, or a numerical subject is often essential, but most portfolio managers also hold a Master’s degree or an MBA. In addition, they take a number of exams with professional bodies that can further demonstrate their knowledge and professionalism. Some of these include the Chartered Financial Analyst (CFA) Institute and the Chartered Institute for Securities and Investment (CISI).