By Brendan Moynihan
If you want to become a portfolio manager, you'll need to do more than don a suit and pick up a copy of the Financial Post.
What Is a Portfolio Manager?
A portfolio manager makes investment decisions using money other people have placed under his control. Portfolio managers, who typically work for bank trust departments and insurance companies, employ a variety of quantitative techniques to help them choose appropriate investments. Using sophisticated computer programs, they stay continually updated and provide information on company news, earnings, and stock prices.
People in this profession typically work long hours, are goal-oriented, and have excellent analytical skills. In addition, successful portfolio managers must show initiative and leadership abilities, and possess excellent communication skills, a strong desire to succeed, and the ability to work independently. They are disciplined, broad-minded, and willing to admit defeat if an investment goes sour.
Portfolio managers may use various styles of management, like relying heavily on computers or common sense. Many money managers buy and hold fixed-income securities, including mortgage-backed, corporate bonds, municipal bonds, agency securities, and asset-backed securities. Others focus on equities, including small stocks, large caps, and emerging-market stocks. Still others work as financial planners, helping individuals develop a secure financial future.
What Are the Qualifications?
The qualifications vary, but most portfolio managers hold at least a bachelor's degree in finance or economics, and have taken courses in bond valuations, capital markets and interest rates, financial statement analysis, equity strategies, portfolio management, international economics and trade, and computer research. Most have a master's in business administration with a concentration in finance or economics.
These days, more and more portfolio managers are required to hold the chartered financial analyst (CFA) designation. The CFA is a self-study program run by the CFA Institute. It takes a minimum of three years to complete.
How Do You Break In?
Most portfolio managers start out on a team of research analysts, analyzing certain segments of a given industry, like the retail, automobile, or airline industries. In this position, the analyst researches individual companies and writes industry reports for portfolio managers to read and consider.
With experience, analysts can move on to writing research reports on individual companies that the portfolio manager will use to decide whether to buy a company's stock or bonds. Then, the analyst will finally be in a position to move on to work on a portfolio management team.
Good places to start are in bank trust departments, insurance companies, and federal pension funds. Many people cross over into portfolio management after years of experience on the sell side of investment banking. Analysts who work for investment banks that take companies public generally have the same skill set and education requirements. The only difference is that these analysts research industries and companies to find ones in which their clients might want to invest.
Most major companies in the business have extensive training programs in which new employees learn about the different products and services the company offers, as well as investing concepts and securities laws.
If you're just getting started, be sure to study portfolio theory, learn about fixed-income investments and security analysis, and take the CFA exam while working in a junior position.
