Mutual Fund Manager Definition Research Paper

Pages: 8 (2438 words)  ·  Bibliography Sources: 4  ·  File: .docx  ·  Level: Master's  ·  Topic: Economics

SAMPLE EXCERPT . . .
S. Securities and Exchange Commission, 2010b).

Managing Risk and Meeting Return Objectives

Mutual fund managers manage based on a specific investment objective. This investment objective determines which assets the fund manager decides to purchase. A fund may be broadly-based, with investments in both large- and small-cap companies across many different industries. Or the fund may have a narrower focus and concentrate only on blue chips, for example, or it may focus only on stocks in a single industry (TradeKing, 2011).

In addition to pursuing the fund's investment objective, the fund manager may follow a specific investing style. For example, a growth fund focuses primarily on stocks that are growing quickly and that appear to have greater than average potential for share price appreciation, whereas a value fund buys stocks that appear to be undervalued by the market in relation to the company's intrinsic worth. While both funds may have growth as an investment objective, they each pursue growth in different ways. Some fund managers may even blend the two approaches to meet their investment objective (TradeKing, 2011).

The mutual funds manager may invest funds based on an investment objective that combines with a specific category of stocks. For example, an international fund's objective might be growth, or it may specialize in small-cap stocks. The following paragraphs discuss different stock fund types which the fund manager considers (TradeKing, 2011).Get full Download Microsoft Word File access
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Research Paper on Mutual Fund Manager Definition of Assignment

The primary objective of the growth fund is capital appreciation over the medium- to long-term. The mutual funds manager of growth funds may invest in both well-established companies with above average growth potential as well as in fast-growing industries such as healthcare and technology. There is a risk with growth companies of the possibility of overpaying for future growth that may in fact never materialize, which risk mutual funds address by spreading investments over different companies. While the diversification that growth mutual funds provide allows the potentially disappointing performance by one company to be offset by the better performance of another, there is a tradeoff when strong returns from one company may be diluted by weaker results from another company. Some growth mutual funds attempt to address this problem by limiting the number of companies in the fund (TradeKing, 2011).

The manager of aggressive growth funds, also known as capital appreciation funds, faces additional challenges due to the greater risk in pursuit of potentially higher returns. The fund manager has to pay close attention to tradeoffs: the relatively high expense ratio due to the cost of frequent trading and research, as well as capital gains and losses that are passed back to the fund's shareholders (TradeKing, 2011).

A value fund's primary objective is long-term growth, although some funds may also produce current income from dividends. The manager of a value fund invests in companies whose stock the manager believes has become undervalued. This undervaluation may result from the company's experiencing legal or management problem, or from being in an industry that is out of favor with the broader investment community. The fund manager looks to invest in companies that exhibit certain fundamental characteristics, such as a stock price that is low relative to the company's assets, earnings or cash flow; companies with products or services that give it a competitive edge; a high quality balance sheet demonstrating sound financials; high or increasing insider ownership; and sound, forward-thinking management (TradeKing, 2011).

The equity-income fund manager focuses primarily on income from equity, i.e. dividends from common, preferred, and/or convertible stock rather than bonds. To pursue that income the fund manager tends to invest in stocks of companies that have a regular dividend payment history. Blue-chip stocks are prime candidates. Similarly, a growth and income fund manager strives for both growth and income, and does so by investing in stocks that pay substantial dividends. Given that the investment objective is income for both fund types, both categories are typically considered less aggressive than a growth fund (TradeKing, 2011).

To sum up, this paper examines the role of the mutual fund manager in the fund's operations and performance. From implementing investment strategy to risk management, the fund manager is tasked with a range of activities and responsibilities that impact the fund's success and profitability.

Reference List

Baks, K.P. (2003). On the performance of mutual fund managers. Retrieved June 22, 2011 from http://www.goizueta.emory.edu/faculty/klaasbaks/documents/manager_000.pdf

Infotec-forums. (2011). Become a mutual fund manager. Retrieved June 22, 2011 from http://infotec-forums.blogspot.com/2011/05/become-mutual-fund-manager.html

Investopedia. (2011a). Fund manager. Retrieved June 22, 2011 from http://www.investopedia.com/terms/f/fundmanager.asp#axzz1Q4VgUohP

Investopedia. (2011b). How do you find out the price of a mutual fund? Retrieved June 22, 2011 from http://www.investopedia.com/ask/answers/03/090503.asp#axzz1Q4VgUohP

Mahalakhshmi, N. (1999). Income funds require a homogenous valuation methodology. Retrieved June 22, 2011 from http://www.indianexpress.com/fe/daily/19990220/fma20042.html

Rediff India Abroad. (2006). How mutual funds use derivatives and benefit from it. Retrieved June 22, 2011 from http://www.rediff.com/money/2006/sep/12mf.htm

Russell, L. (2011). Where's Waldo? -- The illusion of superior professional mutual fund manager performance. Retrieved June 22, 2011 from http://www.theskilledinvestor.com/wp/wheres-waldo-the-illusion-of-superior-professional-mutual-fund-manager-performance-179.htm

Skousen, M. Dr. (2006). The problem with mutual funds. Retrieved June 22, 2011 from http://www.investmentu.com/2006/June/20060626.html

TradeKing. (2011). Mutual fund investment objectives defined. Retrieved June 22, 2011 from http://www.tradeking.com/education/mutual-funds/investment-objectives-defined

U.S. Securities and Exchange Commission. (2008) Invest wisely: An introduction to mutual funds. Retrieved June 22, 2011 from http://www.sec.gov/investor/pubs/inwsmf.htm

U.S. Securities and Exchange Commission. (2010a). Calculating mutual fund fees and expenses. Retrieved June 22, 2011 from http://www.sec.gov/investor/tools/mfcc/mfcc-int.htm

U.S. Securities and Exchange Commission. (2010b). SEC staff evaluating the use of derivatives by funds. Retrieved June 22, 2011 from http://www.sec.gov/news/press/2010/2010-45.htm [END OF PREVIEW] . . . READ MORE

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