What does this person do?
Portfolio managers make investment decisions and buy and sell shares and other securities on behalf of clients. They choose and monitor appropriate investments and allocate funds accordingly. Sometimes referred to as money managers, portfolio managers strive for the highest return on clients’ portfolios while minimising risks as for as possible. Their tasks include, but are not limited to:
- Making investment decisions on how their clients’ assets should be used or managing a financial institution’s asset and liability (loan and deposit) portfolios
- Making decisions about investment mix and policy, matching investments to objectives, asset allocation for individuals and institutions, and balancing risk against performance
- Designing customised investment solutions for clients as per their income, age as well as their ability to undertake risks
- Managing and working with a team of analysts and researchers to establish an investment strategy, selecting appropriate investments and allocating each investment properly for a fund
- Keeping abreast with the latest changes in the financial market by reading reports, talking to company managers and monitoring industry and economic trends
The portfolio manager has to understand the investment goals of the client and ensure that the investments he/ she oversees meet those goals. The portfolio manager therefore has to have broad knowledge of companies, company earnings and stock prices. Portfolio managers rely on a mixture of complex (mostly electronic) technical analysis and fundamental analysis of companies to help them choose appropriate investments for clients.
Although portfolio managers have their own personal way of investing, they all need strong quantitative analytical skills. They should also be open minded, well-disciplined, patient and have a thorough understanding of companies and financial markets so that they can detect changes in the market quickly and react accordingly. Portfolio managers need good communication skills to build relationships with their clients and understand their financial needs. They must be able to do formal presentations that persuasively demonstrate their investment strategies to people who are not necessarily financial experts. Volatile markets can make the life of portfolio managers very stressful. To be successful, they therefore need the ability to remain calm and work efficiently under pressure.
A Senior Certificate with matriculation exemption is a must. Compulsory subjects are mathematics and English; useful subjects are accounting, computer science and economics.
Undergraduate programs, A Bachelor’s degree in finance or economics is a minimum requirement for portfolio managers, most of whom have an MBA with a financial or economic focus.
Many portfolio managers are also Chartered Accountants who have passed the exams and requirements of the South African Institute of Chartered Accountants (SAICA). A portfolio manager needs to have studied and gained expertise in such areas as bond valuations, capital markets and interest rates, financial statement analysis, portfolio theory and management, fixed income investment, international economics and trade, equity strategies and computer research. The table below lists some appropriate undergraduate courses. Also consult the courses relevant to the career of the Financial Planner.
Many portfolio managers start out as members of a team of research analysts, analysing certain segments of a given industry such as the retail or mining industry. The analysts research individual companies and write industry reports for portfolio managers to read and consider. After gaining the necessary experience, analysts can move on to writing research reports on individual companies that the portfolio manager may use in deciding whether or not to buy a company’s stock or bonds. Analysts will later be in a position to work as members of a portfolio management team.
Good places to start are bank trust departments, insurance companies and pension funds. Many people cross over into portfolio management after years of experience in the sales side of investment banking.
Pension funds or money management firms usually hire portfolio managers to oversee investing for clients such as institutions or groups of individuals with specific investment aims.
The regulation and supervision of investment-, portfolio- or fund managers in South Africa depends on a variety of factors including the nature of the services they provide, the type of fund structure they manage and the target investors.
In general, the provision of fund management services is subject to regulation in terms of the Financial Advisory and Intermediary Services (FAIS) Act. However, if the manager manages a Collective Investment Scheme (CIS), the provision of that service is exempted from regulation in terms of the FAIS Act as it is subject to regulation in terms of the Collective Investment Schemes Control Act, (CISCA). Managers of private equity funds and hedge funds must meet additional requirements if their funds are to qualify as private equity funds or hedge funds as defined in the investment regulations to which most pension funds are subject.