One of the crucial aspects of investing in mutual funds in India is portfolio management that includes bonds, stocks, and various other asset classes. Mutual fund is efficiently managed either passively or actively by the fund manager. This usually has a substantial impact on the fund’s performance as well as your portfolio over the time. Thus, it may be fair to say the mutual fund manager’s role is crucial in either making your investment profitable or unprofitable.
What is the major role of the fund manager?
As an investor, when you opt for a mutual fund investment, it involves forming a portfolio of various securities. A fund manager is someone who, based on analysis and research, makes the decision about selling and buying. They can manage your portfolio either passively or actively.
In case your portfolio is managed passively, it means it is based on the established index and components are selected by keeping in account the underlying index. On the contrary, if your portfolio is managed actively then the fund manager selects the component of the portfolio. Note that mutual fund managers play a key role in performance of an active mutual fund.
What are the responsibilities of a fund manager?
Meet the reporting needs
A fund manager design funds by keeping in account the reporting standards according to the regulatory guidelines. For building the fund, the manager considers the investors’ objectives, strategies, expenses, risks, and different policies. Managers are liable to ensure that investors are thoroughly aware and follow the details and rules. Also, it is the fund manager’s responsibility to ensure that all documents are furnished within time and they abide by the rules and regulations.
Comply with the regulatory authorities
Operations of funds must be in alignment with the rules formed by the governing bodies like SEBI (Securities & Exchange Board of India) and other authorities. Such regulations cover all the aspects, right from signing clients to managing redemptions. In case of any noncompliance, fund managers are liable to present an answer to the investors and legislators.
Fund managers are required to protect the investors’ wealth. Given that funds are subject to market risk, they should not be subjected to careless risk assumption. A fund manager’s decision about purchasing or selling of the assets must be based on in depth research as well as due diligence.
To protect the investors’ wealth, the manager must, if required, employ investigation in the company, use risk management skills to assess the investment, etc. To address the risk, fund managers must make sure there is sufficient asset portfolio diversification.
Monitor performance and growth of the fund
Fund manager must take the call about where to invest. Note that such a decision is governed as per regulations, objectives, and expectations of the investors. Investors, before making an investment through MF online platform, judge the fund manager based on how well their chosen funds perform and how they are expected to deliver growth over the inflation rate.
Hire for assistance
As the responsibility of managing a mutual fund is extensive, fund managers must get help from different experts and firms to deliver good results. Certain duties like getting capital, issuing annual reports, negotiating with the brokers and others are outsourced. By this way, mutual fund managers can transfer few of the regulation linked responsibilities to third party. However, ultimately it is just the fund manager’s responsibility to check and manage the funds.
Fund managers are responsible for selection as well as performance of the funds, and thus you should factor in certain parameters for assessing your manager. You can differentiate between an average and good fund manager by looking at their experience, educational qualification, current and historical returns etc.