What does the portfolio manager contribute to the investment process?

The decision maker

Jill enjoys getting deep into the weeds of capital growth and that led her to a career as a portfolio manager. It wasn't just the reward in knowing she could generate profit from a capital resource, both physical (eg- currency) and digital (eg- Bitcoin), but the likelihood that there could be a larger humane footprint left behind from individual investment decisions. Jill knows that her customers, the investors, are only (mostly) interested in bottom-line profit but they may balance an expected rate of return (eg- 4% interest vs. 4.5%) against a societal or environmental benefit (eg- wind power manufacturers vs. gas vehicle producers) that is provided by the company being invested in.

An example of this thought process comes with ESG (Environmental, Social, Governance) directives. Many investments, such as battery production, may have near-term social benefits. However, long-term maintainance of the source of materials needed to produce the efficiency could be more detrimental or problematic to obtain than the actiual benefits received.

Jill explores where her clients funds could best be deployed and executes a wide range of tasks and responsibilities to manage the investment strategy and report to investors on progress. A portfolio management system is used for the functions Jill needs to organize the existing portfolio. The portfolio management system is also used as a shadow accounting system for the fund administrators books and records so that various reports can be generated from the system to evaluate risk and exposure.

From the early morning hours, Jill is busy catching up on overnight news and global market movements and she reviews pre-market trading activity and analyst reports, looking for trends and potential trading opportunities.

Jill also works with Jim, a research analyst, who does risk exploration and discovery on the existing portfolio. Jim is working to understand the effects of global events on the companies where investors have placed their funds (eg- there may be a negative long-term impact on a battery company that has a natural resource supplier in a war-torn region.).

Jim also occasionally performs due diligence analysis on potential investments for portfolio compliance. Portfolio compliance implies that the rules set forth by the investors are adhered to (eg- don't invest more than 15% of funds to interests in Africa.). Jill has morning meetings with Jim (the "investment team") where they discuss overnight developments, review current portfolio positions, and debate potential trades. A significant portion of their day is dedicated to research, as they both read company reports, industry analyses, and economic data to deepen their understanding of potential investments. 

Jill may also attend meetings with company executives and research analysts while Jim meets with fund sales representatives. These meetings are to gain insights into companies of interest and learn about alternative opportunities

Strategic portfolio goals are affected by shifting geopolitical situations and will likely affect the expected value of existing individual positions or the need to acquire a new holding. The amount of capital to be committed is calculated in real-time and position adjustments are organized for the portfolio manager to act on.

Tony is the execution trader responsible for the workflow required to spend the capital on an investment directed by the portfolio manager. Jill, the portfolio manager creates orders in an order management system that are sent electronically to Tony who receives the orders in an execution managment system. Tony's job is to monitor market trends and seek out opportunities to acquire or liquidate positions as needed or expected by the portfolio manager.

Client communication is also a crucial aspect of the portfolio managers job. The portfolio manager discusses with investors, either through personal meetings or monthly reports, the current state of the portfolio strategy with anticipated portfolio changes in a clear and transparent way.

Throughout the day, the portfolio manager analyzes overall portfolio performance, looking for areas of potential risk or optimization and may develop action plans in response to market shifts.

Jill spends her evening hours preparing for the next day by reviewing the day's trades and market close analysis. She continues to monitor trading after-hours for any major price movements and create to-do lists and prioritize tasks for the coming day.

A day in the life of a portfolio manager is a blend of analysis, decision-making, client communication, and market monitoring. It requires a strong understanding of the financial markets, excellent communication skills, and a commitment to staying up-to-date with the latest developments in the industry.

The glory of a profit and the wrath of a loss