Portfolio Manager

What does portfolio manager do? I hear many versions. I would love to know what portfolio mangers do and why the job is considered so cool?

This should help answer. The difference between a trader and a portfolio manager (taken from a blog): “As it happens, few traders end up making the leap to funds, even when they have talent. The reason is that most hedge funds are looking for multifaceted portfolio managers, not directional traders of single asset classes. That is, a portfolio manager (PM) will carry a number of positions in his or her book, many of which are not correlated and some of which may hedge other positions. Compensation for the PM is based on the performance of the portfolio, with a premium placed on risk-adjusted returns (i.e., the fund does not want a PM taking massive risks to make returns, a lesson recently exemplified in the SocGen episode). The portfolio, as a result, has to be diversified, and it has to hedge risk. Such hedging is often accomplished with options, futures, and other derivative instruments, not simply by adding to or taking off of positions. For this reason, much of the day-to-day work of the PM is managing the portfolio–adjusting hedges, adding to positions at good prices, taking profits at good prices, stopping positions out at preset levels, keeping up to date on news and research affecting the portfolio, scouring for ideas to add to the portfolio; it is not taken up with daytrading. PMs may hold positions for a few days, a few weeks, or many months: much depends on their core strategies and competencies. At a good fund, traders will have expertise across a variety of strategies and markets, which provides the firm with diversification.”

That doesn’t sound particularly interesting at all. I guess the money is good though.

BosyBillups, Thanks for your reply, it helps a lot. It seems one can be a trader right after school, however it takes much longer time to become a portfolio manager. What is the best route to become a portfolio manager? Given the person has a quantitative background like a master in financial math + CFA. Should we go with a big named bank to start our career? Thanks,

If you have the requisite masters + cfa, your best bet is to look for an asset management firm who might have junior pm openings, or if not, try to get into one of these firms as a trade assistant so that you can learn. experience is as important as education.

That blog seemed like it was describing a sell-side PM role… But really, a PM role on the buy-side is so diverse that it will depend on the firm you’re joining. Some shops, the PM only goes out to meet clients and potential new clients while the analysts and traders are left to do the real decisions and PMing. Some other shops, the PM will be trading while the analysts do the real analysis.

What is sell-side PM? Why sell side needs portfolio manager?

“That blog seemed like it was describing a sell-side PM role…” What?

Homie don’t play dat!

By the very definition, there cannot be portfolio managers on the sell side. Yes, there can be PMs at “sell side” shops, but not everyone that works at an investment bank is on the sell side. There are more than a fair amount of buy side roles.

I can’t give any views on the work that being a sell-side PM would entail (I haven’t yet encountered one), however, I can say (from direct observation) that being a hedge fund PM is quite interesting

I also have no idea what a sell-side PM is. The fact is there are so many different varieties with different duties, ranging from a mutual fund to hedge fund to private wealth to people titled PMs that just hold a bunch of real estate. As to the allure of the position I guess part of it might be the power or authority to make big decisions, the money obviously, or something I do not yet understand. But to understand what each does I think you might have to look at each version a little more specifically, just my opinion.