The world of the investment manager

There are a lot of misconceptions about the role of the investment manager

Most investment advisors use professional money managers to manage all or part of their clients’ assets. I thought it prudent to give you an insight into the world of the professional money manager.

The majority of investment managers are found in the mutual fund industry. This industry in Canada manages over $810 billion on behalf of Canadian investors. There are managers for money market, bond and equity (stock) mutual funds.

For the sake of interest I am going to give you some insight into the activities of a Canadian equity mutual fund manager.

The equity manager will run a portfolio on behalf of his/her firm and can range in size from a few million to billions of dollars. The main goal of the manager is to achieve a reasonable rate of return with a reasonable amount of risk. This risk return relationship is monitored on a continuous basis.

Most managers have a benchmark against which they are compared, in the case of a Canadian equity portfolio the benchmark would be the Toronto Stock market (S&P/TSX Composite Index). Most managers have analysts that work with them to provide research reports on the stocks in their universe, for example if a Canadian Equity portfolio is being managed then the universe is all Canadian stocks, we are making the assumption that the portfolio is a multi-cap meaning it can invest in Canadian companies of all sizes.

The main functions of the investment manager are:



• Manage inflows and outflows of the portfolio

• Add to existing and new positions with inflows

• Sell stocks that have hit their sell targets or that have disappointed and reallocate proceeds

• Maintain a cash balance to satisfy redemptions (outflows)

• Research companies by meeting with senior management, their suppliers, their clients and their competitors.

• Review companies financials

• Review third party research reports

• Establish buy targets for companies on their buy list in terms of stock price

• Establish sell targets for stocks when purchased

• Execute buy and sell trades through the trade desk

• Attend research meetings weekly

• Allocate a certain amount of time to marketing.



One of the most important functions of the professional money manager is to set a sell price.

Most managers know what they will sell a stock for at the point of purchase, this really distinguishes them from the amateur investor that gets caught up with the sudden rise in a stock price and tends to hold on perhaps ultimately losing money.

Any dummy can buy a stock; the true skill comes in knowing when to sell.  Once the stock price reaches its sell target it generally has to be sold unless fundamentals have changed.

Professional money managers do not get emotionally attached to a stock or investment idea and all buy and sell decisions are made with the support of hours of research work. Mutual Funds do charge fees, hopefully this article gives you an idea of the scope of work that is being done behind the scenes.

Remember to always consult your advisor before taking any action.



Written by Stuart Kirk, CIM


Stuart Kirk is an Investment Funds Advisor with Manulife Securities Investment Services Inc and a Wealth Advisor with Precision Wealth Management Ltd. The opinions expressed are those of the author and may not necessarily reflect those of Manulife Securities Investment Services Inc or Precision Wealth Management Ltd.  For comments or questions Stuart can be reached at or 250-954-0247.



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