Apply Now
Reading time – 3 minutes
Many investors believe in hiring portfolio managers to create and manage portfolios on their behalf. Portfolio managers help people and institutions plan their investments intelligently and help them enhance the value of their investments over time. Should you be reaching out to a portfolio manager? Read on to find out.
Portfolio managers build and manage investment allocations for their clients. - They may also work as per predetermined investment strategies that they devise to achieve the client's financial objectives.
The role of portfolio manager entails a number of things:
Individuals usually make smaller investments and have shorter, more specific time horizons. On the other hand, institutions make larger investments and have a longer time horizon to remain invested. The portfolio manager's job is to communicate with each client to understand their investment horizon, desired returns and appetite to take risks.
A portfolio manager interacts with clients before deciding the most most suitable asset classes for them. For instance: equities, bonds, real estate, private equity, etc. They try to create a portfolio with a good balance of securities that can yield good returns while mitigating investment risks.
A portfolio manager strategically allocates assets depending on the customer’s risk appetite. For instance: A portfolio can be 60% equities and 40% bonds, for investors who wish to create a balance between risks and returns. Another portfolio may comprise 80% assets allocated in equites, and 20% ind debt, if the investor wants aggressive returns and is comfortable risking the investment. Yet another investor may invest 80% in debt instruments generating steady returns, with only 20% assets allocated towards equities. There may be situations in which the portfolio manager may need to rebalance the asset ratios to achieve their client’s financial objectives.
Portfolio managers may opt to apply both strategies in a single portfolio. However, it cannot be at the same time as both approaches are contrasting investment philosophies.
Assigning weights to asset classes also allows the Portfolio Manager to bring under control the following:
The performance of a portfolio is measured using what is called the CAPM (Capital Asset Pricing Model) model. The CAPM performance measures can be derived using a regression of excess portfolio return on excess market return. This will help arrive at the systematic risk (β), the value-added expected return of the portfolio (α)and the residual risk. In simpler terms, the returns on the portfolio are measured against the returns of the market in the same time period.
Get access to a dedicated Relationship Manager and a team of investment experts.
Choose DBS Treasures
A wide spectrum of investors wanting professional advice and experience in managing their assets are served by portfolio management services. The following are the two primary client types that gain from portfolio management:
People with hectic schedules or little experience with investing can benefit from portfolio management services. Portfolio managers are able to create a personalized investment strategy based on your risk tolerance, investment horizon, and financial objectives. They take care of choosing securities, allocating assets, and continuously keeping an eye on your portfolio.
Large and intricate portfolios are frequently managed by organizations like insurance companies, pension funds, and endowments. Portfolio managers create complex investment strategies and oversee risk across several asset classes to help investors achieve their financial goals.
A variety of financial goals, catered to the requirements and risk tolerance of individual investors, is the aim of portfolio management. Typical goals include:
Portfolio management strategies can be broadly categorized into active and passive approaches. Each strategy has its own advantages and disadvantages, and the best choice for you depends on your individual financial goals and risk tolerance.
Active portfolio management involves a manager making active decisions to outperform the market by selecting specific securities and adjusting the portfolio's allocation based on market conditions and analysis. Active managers aim to identify undervalued securities or market trends to generate returns that exceed the benchmark index.
Passive portfolio management, also known as index investing, involves tracking a market index such as the Nifty 50 or Sensex. This approach aims to replicate the performance of the index by investing in all the securities that make up the index. Passive strategies typically have lower fees than active management due to their less intensive approach.
Furthermore, depending on investment goals and risk tolerance, many other methodologies can be used for portfolio management. These are a few typical kinds:
To become a successful portfolio manager, one needs to possess a strong foundation in financial knowledge and investment principles. This can be achieved with a degree in finance, economics, accounting, or a similar discipline. Furthermore, earning pertinent certifications like the AIMR, CFP, or CFA can improve your credentials and raise your prospects of success in this cutthroat industry.
While not mandatory in India, obtaining relevant licenses can enhance your credibility and demonstrate your commitment to the profession. Some common licenses include:
In addition to licenses, obtaining relevant certifications can demonstrate your expertise in specific areas of portfolio management. Some popular certifications include:
Portfolio managers specialise in different areas of investing. They are:
Portfolio managers typically make investments based on the amount of assets or funds clients can allocate. They typically aim to allocate assets in a way that diversifies the investment, while generating maximum returns and mitigating risks.
All portfolio managers are responsible for managing assets like mutual funds, institutional funds, hedge funds, pension and trust funds, commodity and high net worth investment pools, etc.
Portfolio managers can also specialise in different investing styles or hedging techniques, growth or value management, management by market capitalisation (large-cap, small-cap, etc.), domestic and international fund investing, etc.
Portfolio managers are required to take important decisions and analyse several reports every day. There are many skills that they must have:
Portfolio managers have exceptional data interpretation skills coupled with an ability to conduct and understand high-quality financial research. They use their remarkable communication skills -to deliver strong portfolio performance for their customers. If you are looking for ways to grow your wealth over time, a portfolio manager could offer a proven and reliable way to do so.
Are you looking for a wide suite of investment solutions to build your portfolio? With DBS Treasures, choose from a host of products to start your financial journey.
*Disclaimer: This article is published purely from an information perspective and it should not be deduced that the offering is available from DBS Bank India Limited or in partnership with any of its channel partners.
The purpose of this blog is not to provide advice but to provide information. Sound professional advice should be taken before making any investment decisions. The bank will not be responsible for any tax loss/other loss suffered by a person acting on the above.
Contact us 1860 267 1234 / 1800 209 4555
Only from SG 800 852 6186
For Int'l +91 44 6685 4555
Or have someone contact you
