Hiring an investment manager is an important decision that requires careful evaluation of their core responsibilities. As a client, you need to ensure the investment manager has the necessary skills and experience to manage your portfolio according to predefined investment goals and risk tolerance. This article outlines key duties like developing investment strategy, managing portfolios, regularly reporting performance, upholding ethics and fiduciary responsibilities that should be assessed before bringing an investment manager on board.
Developing customized investment strategies aligned with client goals
A core duty of any investment manager is to develop investment strategies tailored to each client’s financial situations and goals. This includes thoroughly understanding short and long-term objectives, risk appetite, liquidity needs, tax considerations etc. Based on this, they formulate optimal asset allocation plans specifying the types of securities, geographic regions, industry sectors to invest in. Their investment philosophy and process for security selection, portfolio construction should match client requirements. Look for demonstrated ability to create customized strategies.
Prudently investing and managing portfolios per agreed strategy
The investment manager is responsible for making buy/sell decisions and effectively managing the portfolio on an ongoing basis according to the client-aligned investment strategy. This includes researching and analyzing securities to identify appropriate investments, determining optimal weights and periodically rebalancing holdings. They should proficiently execute trades, maintain adequate liquidity and ensure minimal tax implications. Strictly adhering to predefined strategy parameters regarding asset types, risk profile, concentration limits etc. is also vital.
Regular monitoring and detailed reporting of portfolio performance
Another major accountability is to continuously track portfolio holdings and measure performance relative to suitable benchmarks. This enables assessing how well the investment strategy is working. The manager should provide comprehensive, accurate and timely reports to clients regarding returns, risks, costs, transactions, income/capital gains accounting and other relevant details. Ensure capability for transparent communication on portfolio progress.
Upholding high ethical and fiduciary standards
An investment manager owes fiduciary duties to place client interests first and avoid conflicts of interest. They must exhibit highest integrity by being transparent in operations, honestly communicating with clients, not misrepresenting credentials or making false promises. Protecting confidentiality of client information is also imperative. Evaluate commitment to strong business ethics while vetting investment managers.
When looking to hire investment managers, scrutinizing their core duty execution regarding developing customized strategies, prudently managing portfolios, monitoring and reporting performance as well as commitment to ethics and fiduciary responsibilities is key for making an informed choice.