What Is A Fund Manager?

Dave Beard

Written by Dave Beard on March 20, 2019

Updated March 20, 2019

Fund managers looking at share prices

For those looking to make a better return on their investment than that available through a typical UK savings account, buying shares is a good option, even if you don’t have a huge amount of money to invest because they generally offer a greater return in the long-term.

What are shares?

Shares are basically buying a (very) small percentage of the overall company; the more you own, the more of the company you own. The value of shares is determined by how successful a company is, the prospects for the sector in which it works, and external factors such as Brexit, which could impact how well it does in the future.

The share value also determines how great a return you’ll make on your investment, which you get paid through dividends or selling your shares on at a higher price than you paid for them. Remember, though, that the value of shares can go down as well as up and, because this can happen on a daily basis, if you plan on investing in shares, that plan should be long-term.

In the UK, individuals can buy and sell shares themselves. However, unless you have a strong understanding of the stock market and financial sector, the risks are much greater than if you invest through a fund and use a Fund Manager.

What do fund managers do?

Fund managers are financial specialists responsible for managing investments on behalf of:

  • individual investors
  • groups of investors
  • corporate investors.

Fund managers who work with individual investors tend to manage smaller funds that those who work with groups of or corporate investors. As a result, they may work alone, whereas other types of fund managers will work as part of a larger team.

The ultimate aim of a fund manager is to provide their investors with the best possible return on their investment through buying and selling shares based on their knowledge of the market and an agreed investment strategy.

This strategy will clearly outline the level of risk associated with the fund and the type of investments it will make, e.g. sectors it will invest in or the size of the company. Fund managers produce regular reports on the fund’s performance against the strategy, which is presented to investors in person and through written reports.

Fund managers may also work with clients on trusts, stocks and other investment tools (this will depend on their areas of expertise). They might also be supported by a team of investment analysts and junior fund managers; this will be determined by the size of the fund and the organisation they work for (the larger the organisation, the larger a fund managers team will be).

While fund managers spend the majority of their time managing the fund itself, they are also responsible for attracting new investors, managing staff and ensuring the fund is operating in line with all relevant legislation and regulations.

What qualifications should a fund manager have?

Most fund managers will have qualified as a Chartered Financial Analyst (CFA) prior to taking up their role. In addition, a lot of fund managers will have MBAs or other advanced degrees; while these can be any subject, they tend to be related to business or finances and include business administration, accounting, economics, mathematics or statistics.

Fund Managers also need to have extensive experience prior to taking up the role. This may include working in banks or for other funds in a more junior position such as an Investment Analyst, allowing them to learn and understand every aspect of the business including accounting, managing portfolios, responding to changes in the market, government legislation and the moral responsibilities that come with managing other people’s money.

While employers are responsible for ensuring fund managers are suitably qualified, they should follow guidelines as outlined by the Financial Conduct Authority (FCA). These guidelines are available on their website, along with organisations authorised to provide financial advice and manage investments.

How are fund managers paid?

Fund managers can earn a lot of money if they are successful because they are paid based on how well the funds they manage perform for their investors. Payments are calculated as a percentage of the total market value of assets under management (or AUM).

You will be charged a fee based on how much you have in the fund based on the AUM. This percentage will vary between fund managers and financial institutions. However, in the UK, it should be outlined in any Key Information Document.

Some financial institutions only include money held in the fund in the AUM fee. Others will include all the money you hold with them including savings, cash and mutual funds. Make sure you know just what is included before you invest.

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