A money manager is a dedicated professional or financial firm responsible for managing the securities portfolio of individuals or institutional investors. These professionals carry a depth of expertise in investment options and asset monitoring, tailoring decisions to buy and sell investments that deliver the highest returns. As fiduciaries, money managers are bound to act in the best interest of their clients at all times. Other terms often used interchangeably include ‘portfolio manager,’ ‘asset manager,’ and ‘investment manager.’
Key Insights
- Money managers are integral professionals or firms that handle securities portfolios for both individual and institutional clients.
- They prioritize client interests, avoiding transaction commissions, and typically earn through a percentage of assets under management (AUM).
- Their fiduciary duty ensures the careful and profitable management of investments.
How a Money Manager Functions
Money managers provide bespoke service and ongoing management aligned with the client’s needs. They adopt a fee-based model, detaching from commission-based influence and ensuring their incentives align with the client’s interests. Payment is derived from a small percentage of the AUM, ensuring mutual benefit in growing portfolios.
Why Hire a Money Manager?
Expertly trained money managers often hold respected qualifications like the Chartered Financial Analyst (CFA) designation, equipping them to scrutinize company fundamentals thoroughly. Industry-specific expertise also adds merit. Resources at their disposal include rich data sources, interviews with top executives, comprehensive research reports, and sophisticated financial modeling software—all pivotal in crafting successful investment decisions.
Fact
Median annual salary for money managers in the U.S. recorded at $134,180 as of May 2020.
Monetary Compensation for Money Managers
Standard management fees for money managers range between 0.5% to 2% annually per portfolio size. For example, managing a $1 million portfolio at a 1% fee translates to a $10,000 management fee. Many also charge a performance fee, approximately 10% to 20% of the profit — a $25,000 fee for a $250,000 profit at a 10% performance rate.
Exemplary Money Managers in Action
Renowned money management firms accessible to retail investors include Vanguard Group Inc., Pacific Investment Management Co. (PIMCO), and J.P. Morgan Asset Management. Luminaries like Warren Buffett of Berkshire Hathaway and Bruce Berkowitz of the Fairholme Fund exemplify leading individual money managers.
Related Terms: fiduciary, fee-based management, CFA, financial statements, performance fee.
References
- U.S. Bureau of Labor Statistics. “Financial Managers: Pay”.
