How Does Asset Manager Or Fund Manager Impact Your Portfolios Performance
(OG – ASSET MANAGER OR FUND MANAGER – WHICH ONE TO PICK)
Asset manager or fund manager – Which one to pick to boost your portfolio performance?
Investors trust fund managers and asset managers to invest their money responsibly in financial products like mutual funds. However, having a clear understanding of the roles of asset manager vs fund manager is important for making a better choice when you invest in mutual funds.
The illustration below will help you clearly understand the differentiation between an asset manager and a fund manager.
Investment managers are different from fund managers and asset managers. Investment managers work directly with the investor and help them choose the right mutual fund, stocks, and bonds based on their risk tolerance and return expectations. Unlike fund managers, they do not create mutual fund portfolios. Portfolio managers differ from fund and asset managers too. The former conduct asset management for bigger institutions, whereas fund managers manage smaller funds and assets.
Role of an asset manager
The asset manager is responsible for creating a broad framework for risk management and investment philosophy. They launch various schemes and entrusts their fund managers to manage them. An asset manager plays the following roles in determining an investor’s mutual fund returns:
- Document the processes: Most asset managers have a document that lists down the ground rules for constructing mutual fund portfolios and stock picking.
- Risk management: Having a robust risk management framework ensures that returns earned are not negatively impacted. It reduces the risk from the fund manager’s personal biases.
- Managing all mutual fund schemes: The asset manager must ensure that all mutual fund schemes that they operate are effectively supervised. This ensures that each scheme is managed according to the predetermined characteristics and achieves the desired returns for investors.
Role of a fund manager
A fund manager is entrusted with managing one or more mutual fund schemes within the procedures set by the asset manager.
- In-depth research and analysis: A fund manager uses their skill and experience to build a high-conviction securities portfolio. Even though the asset manager defines the stock selection framework, the fund manager’s choice of securities can make or break the scheme’s returns.
- Fund strategy: Each fund manager must devise a strategy for mitigating or benefiting from market volatility and maximising returns, keeping in mind the characteristics of the scheme they manage. For instance, a particular fund manager may create a portfolio of defensive vs. aggressive stocks, value vs. growth, etc.
- Review and monitoring: A fund manager may have multiple schemes under their management. None of the schemes must be neglected. Each of them must follow a predetermined strategy and regular performance analysis. Keeping track of inflows and outflows is necessary.
Pros and cons of making a mutual fund investment based on asset manager vs based on fund manager
|Choosing a fund based on the asset manager||Choosing a fund based on the fund manager|
|The philosophy and the risk management framework of the investments would remain reasonably constant over time.||The benefit of choosing a fund manager of your choice based on their skill, experience, and consistent past performance track record|
|No control over the fund manager appointed to manage a particular scheme||The fund manager could leave the asset manager, and the scheme’s management would be left to someone else.|
What is the ideal option?
As an investor, the first criteria while choosing where to invest must be finding the right asset manager. To do this, you must look at the assets under management of an asset management company, the number of schemes launched by the asset manager, and the consistency in their performance. As a second step in decision making, you could try to understand the relationship between the asset manager and the fund manager, and whether the fund manager’s style is in line with the asset manager.