How to Evaluate a Portfolio Manager

Portfolio Manager A Portfolio Manager is a professional investment advisor who manages his clients’ assets.

A Portfolio Manager is expected to keep a watchful eye on all his client’s investments and take corrective measures when appropriate should the market turn in the wrong direction resulting in a decrease of the total value of the portfolio.


How to evaluate a Portfolio Manager

A portfolio manager must meet two conditions:

  1. He/ She should be registered with an investment authority
  2. He/ She should be certified to act as a manager

A portfolio manager might not necessarily have an educational background in finance or accounting, but certifications in the field of investment (such as the Chartered Analyst (CFA) program) are good to have.

A portfolio manager working on behalf of a bank or an internationally recognized firm such as Merrill Lynch has access to investment products that independent advisors do not.

It is important to include this information in your analysis of an advisor.

A good way to evaluate a manager is to ask many relevant questions pertaining to your own personal financial situation and your financial goals. Examples of questions to ask are:

  • How often will I receive communicate from you?
  • How often will you make or suggest changes to my stock portfolio?
  • How many clients do you have? Will you be too busy to fully take care of my needs? Do you understand the needs of clients in my financial situation?
  • Is there a minimum amount that I am required to deposit in order to invest?
  • What is your commission structure? Are there any fees that I should be aware of?
  • Who audits your firm’s financial activities?
  • How long have you been with your current employer and what happens if you leave organizations? Will my fund be transferred, or will I be assigned a new investor?
  • Are there any fees or penalties if I pull out my money?

Questioning the portfolio manager’s specific knowledge of investment management is also important to make sure you are dealing with an individual who has enough knowledge of the market to suit your needs.

More qualified managers are able to answer questions in a more confident and informed way, such as:

  • How often will you perform an efficient frontier analysis (advanced theory of portfolio analysis) of my portfolio?
  • What do you envision the beta and expected return for my portfolio?
  • What was the worst performing stock you purchased for your clients and what did you do about it? How did you remedy the situation? How have you changed your strategies based on this occurrence?
  • If I am not satisfied what are some “exit routes”?
  • Do you offer the opportunity to hedge my portfolio with options?
  • What are your short and long term views of currency fluctuation relating to my personal portfolio?



When evaluating a prospective Portfolio Manager it is important to understand their investment philosophy and make sure that it meshes well with your financial situation and objective.

A Portfolio Manager who believes in speculative investments and penny stocks might not suitable for a client who is close to retirement and requires stability.

Portfolio Managers who partake in activities outside of work relating to investments, such as writing an opinion column for a newspaper, hosting a radio show or leading financial workshops and seminars demonstrate that they have a firm, real-world understanding of investing, and would hopefully be able to manage your investments in a professional, successful manner.

Selecting an investment manager active in many forms of communication will allow a client to gain a more detailed and complete understanding of the manager’s philosophy and personality to determine if the client will feel comfortable in the relationship.

Key Terms: Portfolio, Portfolio analysis, Brokerage accounts, Expected return, Efficient frontier, Beta, CFA program, Hedging, Options

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