The process of managing a portfolio on a segregated basis for an individual client or managing a pool to fund is broadly the same.
In the planning stage for a segregated mandate the portfolio manager must understand their clients investment objectives what they want to achieve from the portfolio and any constraints which may limit which Investments are available to the portfolio manager.
For a pooled fund this will be set by the funds investment mandate.
These objectives and constraints then need to be combined together with the portfolio manager's view on economic Outlook to determine the high level strategic asset allocation for the portfolio which identifies how much of the portfolio should be invested into different asset classes such as equities fixed income or cash.
Asset allocation can also be based on geography or sector such as allocations to utilities or financial services. This strategic asset allocation will have a long-term perspective and we'll typically be agreed with the client before the portfolio is set up.
It may then only be reviewed annually with the client.
In the execution phase the portfolio manager will take the Strategic asset allocation and decide on which Securities to invest in if they are given the scope to by the client. They may look to temporarily adjust these long-term strategic asset allocations based on the short term economic and market conditions.
This is referred to as tactical asset allocation or Market timing.
The ability to engage in tactical asset allocation and to what extent must be agreed with the client in advance.
Having decided how much to invest into each asset class geography or sector the portfolio manager must then attempt to Value the Securities available to invest in and select which Securities they wish to hold within their portfolio.
Finally is the feedback stage in which the portfolio manager will analyze the performance of their portfolio typically using risk adjusted return measures such as the sharp ratio and discuss these outcomes with their clients.
Since different Assets in the portfolio will have performed differently and the weights that each asset holds in the portfolio will have changed. It may be necessary to rebalance the portfolio back to the Strategic asset allocation waitings.
Other than making investment decisions with regards to the portfolios that they manage. There are a number of other responsibilities that can take up a significant amount of time for portfolio managers including fundraising when an investment management company wishes to set up a new fund there needs to be sufficient Capital within that fund to begin to generate returns portfolio managers need to make use of their existing connections with clients to raise sufficient funds to make setting up the new fund worthwhile.
Engagement and voting there has been a trend towards asset managers not just being passive holders of Investments. But instead many asset managers are now more actively engaged in using the power the being a shareholder in a company provides through engagement with management of the company to require them to justify decisions that they are making regarding the running of the company and participating in votes held by the company client reporting much more than just producing a quarterly report detailing the performance of the fund over the previous three months this often involves meeting with key investors in the fund to provide more detail on the performance and also to provide justifications for the positions that were held during the period
