A money manager oversees entire funds or segments of funds, both public and private.

The magnitude of large pools of capital requires infinitely more sophisticated management than ever before in the history of the capital markets. It also elevates the competition for attention to any individual security, and thereby demands greater sophistication in security analysis. When you consider the responsibility in managing multi-billion dollar funds in institutions, pension funds and 401(k) funds, mutual funds, high asset individuals and so forth, you can well imagine why money managers look to the broadest variety of analytical process available. And obviously, they cherish every bit of information about each company that can contribute to the analytical success. Money management is no longer a cottage industry.

The role of the money manager, in any category or specialty, has become increasingly important as the financial universe grows and becomes more complex. The vast influx of institutional funds, the growth of the 401(k), the increasing sophistication of investors and the influx of new investors, the proliferation of new analytic techniques, the increasing use of technology, and the internationalization of the capital markets—all have substantially altered the financial landscape in just the past few years alone. Also altered is the need for more advice and guidance for investors who are unskilled in managing their own investments, and the need for managers who can be trusted to invest to meet predetermined objectives. Thus, the burgeoning of the money manager, the portfolio manager, the mutual fund manager, the wrap account manager—in fact, more managers and experts per capita than ever before.

The title money manager is not cut and dried. In addition to the people who run the large funds, a money manager may be a portfolio manager, the head of a mutual fund, or a bank trust department, or a pension fund, or hedge fund, or a small pool of private investment capital, or a discretionary account for a brokerage firm. Some stock brokers manage money for individuals, IRAs, ESOPs, Keoghs, or even small institutions, such as non-profit organizations with small funds. More brokers are now listing themselves, even if without cachet, as broker and portfolio manager.

Fee-based asset management—the wrap account—has given rise to portfolio managers who develop portfolios of other managers, both stock and mutual fund. Their concern is not the stocks in a portfolio, but rather the investment and risk objectives of individual managers or funds. They are performance experts who manage large funds of money, usually from individuals, and who purchase the services of other funds or institutions. Some stockbrokers have developed clienteles for whom they perform this service, in addition to their classic brokerage activities.

Most money managers tend to use the basic research supplied by their own or other research departments, including research boutiques, to which they apply their own judgment. Money managers of smaller funds do more of their own research because they can be in positions where they have to make decisions quickly. They may not have the time to research an individual investment situation as completely as might an analyst. They do, however, combine instincts and training with reading and computer screening, and more and more, they meet with company management.

An increasing number of managers rely heavily on computerized models, and are concerned about information that can influence a decision, not general, nice-to-know news about the company. Their focus is on news that can affect their models.

Like brokers and analysts, money managers function in many different categories, each of which has different investment criteria. Money managers handling different portfolio sizes—$50 million and under; $50–100 million; $100–250; $250 to $500 million; $500 million to $1 billion; and over $1 billion—will generally have some common characteristics. But beyond that, the investment criteria—objectives and risk parameters—for each group will change. This means, obviously, that the kinds of companies each category will attract differs. For example, a company with a market value of $100 million will certainly get a better hearing with money managers managing $250 million or less than it will from managers at the higher end of the spectrum.

Managing money, too, is a precarious job, since it is directly performance oriented, with very little margin for error. Thus the money manager tries to be as informed as possible in order to have a basis for judging the research factors. Increasingly, money management looks to objectives, whether mandated by ERISA (Employees Retirement Income Security Act) or by financial and marketing goals. Pension fund money is considered to have been managed prudently not simply when its asset value is increased, but when it meets predefined investment goals and criteria. This concept is becoming more ubiquitous in all money management. Thus, while the classic responsibility of the institutional portfolio manager—the person specifically responsible for the performance of all or part of the portfolio of securities for mutual funds, pension funds, banks, insurance companies, and so forth—is to choose securities that increase the value of the full portfolio, new criteria tend to mitigate performance measurements. And obviously, the more sophisticated hedge fund is a useful tool here, as well, for managing performance.

The parameters of each portfolio are very different one from the other. Some funds have portfolios that are passively managed, and drawn to match an index, such as the S&P 500. Some portfolios are actively managed, and chosen for growth, some for rapid appreciation, some for income. Mutual fund portfolios are most often highly specialized, and can be defined by an extraordinary number of different characteristics, such as risk parameters, industry group, geographic region, size or age of the companies within the portfolio, and so forth.

Funds are managed by fundamentalists, chartists, and subscribers to virtually every market theory ever promulgated, and are so identified in the fund’s prospective.

This growing thicket of money managers poses an interesting problem for the investor relations practitioner trying to advocate a client’s stock. There are no sure answers, but there are some rational approaches. For example, examining a portfolio will give some clues to the kinds of securi- ties the portfolio manager might accept, keeping in mind that investment styles and practices may change rapidly, in response to a rapidly moving market. Managers’ interests change as well. Certainly, talking to the manager will help. For a mutual fund, the prospectus defines the fund’s parameters, but not the techniques used by its manager to select stocks.

Obviously, index funds are exempt from the investor relations. The best approach may be to use data from the myriad sources that have sprung up in recent years, as well as your own experience and contact list, to choose the fund that best suits the security, in terms of size, distribution, industry, etc. To best inform the institutional investor, examine the portfolio to determine the best approach to the manager. This is further complicated, of course, by the fact that most portfolio management, like the market and the economy, is fairly dynamic, and parameters change as market conditions change. This means that to deal with any institutional portfolio manager, you have to keep checking.