Readers Question: Who really is a global funds manager?
A global funds manager is person who looks after different investment trusts / pension funds. He will decide where and how to invest the fund of money in different markets.
Individuals with savings may wish to seek better returns than just saving in a bank with a low interest rate. However, individuals may lack the confidence, knowledge, and ability to invest in bond markets / stock markets around the world. Therefore, they can put money into investment trusts. These individual funds are then pooled into a common investment trust.
The global fund manager is then able to get better commission rates and have time to investigate good options for investment.
Functions of a fund manager
- Advise clients about where to save their money and how much risk different options offer. For example, the fund manager may suggest a mixed portfolio, which includes both risky emerging market investment trusts (with the potential for growth in capital) and safer investment positions (e.g. US government bonds, which are quite secure)
- Decide how to use investment funds given by clients. For example, the funds manager may decide to invest a proportion of money in emerging market stock markets, if he feels this offers opportunity for capital growth.
- Investigate different asset markets and economies to decide which assets and markets may be undervalued – and therefore offer good opportunity for improvement.
- Decide whether he needs to sell any assets and move them into assets with the chance for better performance.
- Explain to customers how progress is being made and what is likely to happen to their investments in the short and long term.
Examples of investment potential for a global fund manager
What might a global funds manager invest in.
- Government bonds / gilts – Generally considered to be very secure, low risk. Interest rate might be quite low to reflect this security. However, the Euro bond crisis – shows that even government bonds can be subject to fluctuations – with falling prices and rising bond yields.
- Company shares listed on stock markets. Shares offer potential for capital growth, but carry much greater risk. If a fund manager picks good performing stocks, then the fund can see better than average returns.
- Commodity markets – short term options / long term investment. Fund managers can buy short-term options in commodities like oil, metals and coffee. Or they can buy longer-term investments in metal producing companies.
- Exchange rate markets. Another big issue for a global fund manager is where to put investment funds. If there are investments in Japanese stocks of Japanese bonds, then an appreciation in the Japanese Yen, will give a much greater dollar return on the investment. Similarly if you invest in Euro bonds, but there is a strong depreciation in the Euro, then the US fund manager will lose out.
- Private investment in particular companies. A global fund manager may also invest in offshore hedge funds which specialise in direct loans to firms and enterprises.
What factors will a global fund manager be watching?
- Economic growth. Global economic growth will tend to increase prices of shares and increase price of commodities. This will give better investment opportunities. In times of recession, fund managers may move out of commodities and into more secure assets such as government bonds.
- Interest rates. If a fund manager expects interest rates to rise in the US before other countries, this will make the Dollar more attractive because the dollar is likely to appreciate.
- Inflation / commodity prices
- Value from particular companies. Knowledge that multinational companies are going to be doing badly or well, will help decide which firms to invest in.