Behind every successful mutual fund, the scheme is a credible fund manager; the commander of the ship, the harbinger of growth, or, if you will, the oracle of the trading world. Sounds like a stretch? Well, it’s not.
From buying and selling assets to outperforming the benchmark, a fund manager is primarily responsible for how well your MF portfolio performs in the market. Let’s explore how.
What is the Role of a Fund Manager in Mutual Funds Investment?
What is the role of a fund manager?
A fund manager is a professionally qualified individual responsible for managing the bonds, stocks, and other assets within the MF portfolio.
Fund managers keep a close watch on the macro factors, including market risks, economic trends, politics, etc., to understand the implied risk on the MF scheme. After considering all the odds, they decide on suitable defensive and aggressive fund strategies to reward the investors through market highs and lows.
Moreover, they manage the funds, whether lump-sum or SIP, either passively or actively.
- Active fund management: In the case of actively managed funds, the manager has to build a portfolio aligned to the growth objectives of the fund. Accordingly, the manager needs to select security, analyze risk-return, track performance, etc., to ensure the fund performs well.
- Passive fund management: For passively-managed funds, the performance of the MF is closely linked to the performance of a benchmark index. Here, the manager ensures the funds replicate, if not outperform, the benchmark performance.
Also, contrary to popular belief, fund managers are not lone wolves. They supervise a team of professionals who research and analyze various market metrics and other influential trends to help them make informed investment decisions.
Thus, we can safely assume that the performance of your MF investment is directly linked to the expertise of your fund manager.
Key responsibilities of a fund manager
1. Security selection:
Security selection is one of the most crucial functions fund managers perform. They buy and sell assets within the portfolio based on the investment theme of the fund. Also, they are responsible for how much fund money stays invested and how much remains as cash.
All the decisions are taken to construct a rewarding portfolio for the investors. After all, wealth creation is the end goal.
2. Regulatory compliance:
The Securities and Exchange Board of India (SEBI) has set some rules for the operations of mutual funds, online and offline. All fund managers must follow the SEBI guidelines strictly. If not, they are legally held accountable for non-compliance.
3. Wealth protection:
It is the job of the fund managers to protect your invested capital. To do this, they usually rely on extensive risk-return analysis while also considering factors like stock performance, dividends, economic scenario, among others.
Besides, they also diversify the portfolio by spreading the investments across different avenues, such as equity funds, debt funds, bonds, etc., to minimize risk.
As you can see, a fund manager plays a decisive role in how well a fund performs. So before you invest your hard-earned money in an MF scheme, don’t forget to review the track record of its fund manager.
With investment apps like the moneyfy app available today, you can conveniently compare different MF schemes using multiple metrics and decide on a suitable one.