To understand the role of a mutual fund manager, you need to understand what a mutual fund is. A mutual fund is a jointly owned pool of money. One of the reasons people invest in mutual funds is that it is easier to manage funds jointly rather than individually. This is where the role of the mutual fund manager fits in: the mutual fund manager invests this pool of money for the investors.
The mutual fund manager is a professional financial expert and the principal adviser on the investors’ investments. The people who invest in a mutual fund are normally ordinary people who are interested in getting a return on their investment. They often are not aware of which investments will get them returns and often don't understand the intimate goings-on in the share market. The mutual fund manager, who does have knowledge of these matters, evaluates risks and potential returns and builds a portfolio to accomplish the aims of the mutual fund (growth, return, maximizing dividends, etc.).
The main purpose of the manager’s job is to help investors get the best returns on their money by investing those funds in return-yielding companies. This is not only the managers' source of income, it is also what determines their reputations in the market.
How They Perform Their Jobs
The manager is expected to provide all details of an investment plan, including information about the companies the mutual fund is invested in. The information about the companies the fund owns shares in is included in a prospectus sent to investors. The manager makes sure the investments are spread and diversified over a number of investment options. These are based on a number of factors regarding the individual companies they are investing in, such as the companies index, size, sector it is doing business in and so on. Other considerations include the kind of bonds or shares the manager chooses to invest in. The underlying logic of diversity in a fund is to make sure that losses of any one fund or investment do not become unmanageable.
Since mutual fund managers not only carry out the actual work on behalf of the investors, but to an extent also own the responsibility for the selection of mutual funds in which people invest, they charge a variety of commissions and legally permissible fees for their work. Most of the time, these commissions and fees are established by the brokerage firm the fund manager is employed by. Fund managers are expected to exercise "best practices," which means that they should not make too many trades just to generate commissions, and should make sure the commissions do not become excessively large.
In most cases, mutual fund managers are employees of an investment firm. When a mutual fund is created, investment firms take care of the growth and investment aspects with the fund managers acting on their behalf. In some cases, however, the mutual fund manager can also be an independent financial expert who manages these funds.