eFinancialCareers

Fund managers are professionals who invest money on behalf of their clients. The term "fund manager" can refer either to a firm that provides investment management services or to an individual who makes investment decisions on behalf of others.

Clients can include pension funds, insurance companies and other sources of institutional cash with a view toward making it grow. Individual investors employ fund management professionals through their investments in mutual funds, either directly or as part of an Individual Retirement Account or other retirement plan.

Most investment managers take a long view, buying financial products in the belief their value will rise over time. Today, a newer breed is in charge of many hedge funds. These mangers often have a shorter investment horizon and employ a variety of techniques to "hedge" risk through the use of options or futures while simultaneously holding long positions or by short-selling. (For more, see our profile of the Alternative Investments sector.)

In this section, we focus on the two basic kinds of funds: Passive funds, also called "index trackers," are designed to mimic the performance of well-known stock market indexes like the S&P 500. The investment decisions of passive funds are typically made using computers, and may not hold exactly the same stocks as listed in the index the fund is intended to mimic.

Taking the opposite tack, active fund managers decide themselves what financial products to buy or sell. Their work corresponds to the common idea of what fund management is all about. They invest in products their research indicates are likely to rise in price over time, thus allowing investors to share in the appreciation of the stocks and saving them the work of ferreting out opportunities on their own.

Funds invest in everything from stocks, bonds or real estate to physical commodities such as oil or metals. Different types of clients tolerate different amounts of risk, so fund managers usually offer several different funds at a time. Some offer fast growth along with a larger measure of risk. Others offer slower growth and aim for less risk. Funds also can be highly specialized, targeting specific sectors or regions of the world. Some managers are only interested in small capitalization growth stocks, while others might focus on the world's biggest companies. The ways in which investment products can be categorized is virtually endless, as are the types of funds that cater to the desires of investors.

Most large investment banks have their own fund management divisions, though some have done better than others. There has been some consolidation among those asset management groups. In 2005, Citigroup struck a deal to trade its fund management division to Legg Mason, in exchange receiving Mason's capital markets and brokerage operations. Merrill Lynch followed suit in 2006 in a deal that involved handing its asset management division over to BlackRock Financial - then majority owned by PNC Financial. PNC Financial then sold a majority stake in BlackRock to Merrill. The end result was that BlackRock's assets under management swelled to more than $1 trillion.

Roles and Career Paths

Fund managers focus on the business of managing, and none are hired without experience. Many have an advanced degree - such as an MBA - and many will also have a Chartered Financial Analyst (CFA) designation. Early on, you might gain exposure to fund management as a researcher responsible for identifying potential investment candidates, and eventually work your way into position assisting a principal fund manager. You could also work in the industry as a fund marketer or in an operations role.

In the case of institutional fund management, marketing and sales professionals wine and dine potential clients in an effort to persuade them to invest money, and also manage relationships with existing clients. They meet investment consultants and play a role in the development of new products. Mutual funds can be sold through investment advisors - such as Merrill Lynch financial consultants - or through direct marketing to individuals as is done by fund companies like Vanguard or Fidelity.

Analysts help steer fund managers in the right direction when it comes to choosing assets in which to invest. They spend their time analyzing companies' results and meeting with senior management to discuss strategy. They then write reports communicating their conclusions.

Like their counterparts in investment banks, operations staffers at fund managers do everything from work in information technology to settling and reporting trades. Funds employ compliance staff to ensure they meet regulatory requirements, internal auditors to make sure internal systems and controls function properly, and financial staff to manage the firm's own money.

Skills and Qualities

- Understanding of how the financial world operates
- Ability to select investments that will grow in value
- For researchers, an inquiring mind
- For marketing experts, excellent communication skills