What is Portfolio Management?
Portfolio management is the practice of gathering, evaluating and managing investments that are acquired in accordance to an investment strategy. It’s the task of building a portfolio of securities so that it achieves a desired risk/return profile. This includes selecting which securities to buy, when to buy them, and how much they’re likely to be worth when they finally sell.
How Fintalent can help you hire the best Portfolio Management Consultants
Fintalent, the hiring and collaboration platform for tier-1 Strategy and M&A consultants is the leading platform for the hiring of Portfolio Management Consultants. The platform ensures only the best portfolio Management experts are made available to hiring managers by ensuring it offers only the best qualified and most experienced consultants to the hiring public.
Background of Portfolio Management
The practice of portfolio management is relatively recent compared to the history of investing. The first publications about investment management dated back to the 15th century. In the late 18th century, an investor by the name of John Law suggested a method for estimating capital gains tax that was widely used at that time. There was talk of “money managers” who coordinated investment portfolios in the late 19th century and early 20th century, but they were usually called “bond managers”. The first permanent professional money manager, Charles Dow, founded his firm back in 1902 and then passed it on to his son Nelson.
Portfolio Management has been around for a very long time. The history of the practice stretches back thousands of years. The first known reference to portfolio management was in the 18th Century from John Law who used a simple model to estimate capital gains tax as discussed above. In the 19th/20th century, what would now be called “Portfolio Management” was referred to as “Bond Management”. These were collections of bonds that would be traded based on Mutual Funds. They would show up in bond issues and other financial instruments such as stocks and derivatives. These were not necessarily maintained by a professional and were usually held to maturity, meaning the investor had no desire for the securities to vary in value.
The first true portfolio managers started in the 20th century. “Money Managers” were independent investment professionals who would buy various portfolios of stocks and other financial instruments for their clients based on their risk tolerance and return goals. The term “money manager” had been used as early as 1800 when John Jacob Astor gave out stock certificates to his partners so that they could be referred to as his money managers and thus avoid paying tax on his personal assets.
In 1902, Charles Dow passed on the firm he founded to his son Nelson (Charles was more of a journalist and editor). Nelson Dow is considered the first truly independent money manager in history. He had no clients and was paid a percentage of investing gains he achieved for his partners and clients. In 1910, Earl Jones, a former clerk from Merrill Lynch left to start his own firm with partner Willard “Tubby” Thorne. By 1929 Earl Jones was one of the most successful money managers in the country with over $100 Million under management.
Portfolio Management Methods
Some managers use advanced proprietary software systems like Investment Science or AA-IQ which automate many investment decisions including security selection, portfolio rebalancing, targeted factor allocation and capitalization weighting strategies. Others choose “boutique” software packages or rely on their own judgment in order to optimize their personal investment strategies while still adhering to prudent risk tolerances established by regulators.
Roles of a Portfolio Manager
The importance of a portfolio manager’s role in investment is significant. He or she usually has a large impact on the bottom line results of an investment portfolio. Both decisions to invest and those to divest can have a major effect on portfolio value, performance and risk.
A typical modern portfolio will contain many securities from many different countries and industries, each representing small fractions of the overall investments owned. Theoretically, each individual security will behave differently over time based on the assumptions about that security that were used at the time when it was first purchased. Many managers use sophisticated computer programs that apply various factors to their holdings in order to assess risk/return projections for investments of all sorts. Sometimes each security is assigned a target return, or a maximum loss allowance, for the investment strategy. A portfolio manager who relies solely on his or her own judgment might need to have knowledge of the individual securities in order to make informed decisions.
Portfolio managers also need to understand their investors’ needs and wants in order to provide suitable investment advice. These needs often change rapidly and are driven by a host of factors such as tax burdens, price volatility, liquidity requirements, income goals and more. Furthermore, they may want their investments to be conveniently accessible by retail brokers who can provide service cost-effectively while providing a high level of expertise and selection.
Why you should hire your next Portfolio Management expert from Fintalent
Investment portfolio management is a crucial individual and organizational decision. A robust decision-making process for portfolio management will include an assessment of the existing portfolio to determine if changes need to be made. Investing can be complex, however, the process of portfolio management is straightforward for most investors. Portfolio management includes maximizing returns on your investments and managing risk. The goal of portfolio management is to balance risk and return so that you reach your financial goals over time.
From the foregoing, it can be deduced that Portfolio management is one of the more important function of a finance manager in a firm due to its far reaching consequence. It is therefore not a task to be left to rookies but rather, one that should be handled by a seasoned professional. This is exactly what Fintalent, the hiring and collaboration platform for tier-1 Strategy and M&A consultants offer hiring managers. Fintalent offers hiring managers a one-stop shop for some of the best global Portfolio Management Consultants that are available and ready to take on new tasks.