An investment manager does one of several things depending on the type of manager he is. In some situations, an investment manager oversees a large sum of money aggregated from numerous different clients, allocating that money into different investments. In other situations, the manager advises individuals about what to invest in, but does not actually collect and invest money.
Most commonly, the term investment manager is used in the first situation. Investment managers may manage a hedge fund or a mutual fund. In either case, a large group of investors will pool their money together. The manager will then use all of that money to invest in various stocks, bonds or other investments.
Many mutual funds can be purchased on the stock exchange or stock market. The funds often have specific goals or invest in specific types of stocks. For example, a growth fund invests in stocks of companies poised for growth and expansion. In such cases, the investment manager selects from a variety of emerging markets or smaller companies that may become larger and expand.
Hedge funds, on the other hand, often invest money for only select investors. Hedge fund managers, like mutual fund managers, take a pool of money from investors and manage all of those investments. Hedge fund managers also have specific goals for the fund that dictate what stocks will be invested in.
An investment manager often works for a large brokerage firm. For example, the Vanguard brokerage firm offers mutual funds that investors can purchase on the stock index. Those mutual funds are managed by investment managers who have experience within the investing field.
The managers are evaluated based on the way in which a fund performs. If the fund provides a good return on investment, or makes sufficient money for investors, the managers may receive bonuses and will be permitted to continue managing the fund. If a fund performs poorly, the manager may be fired.
Because many mutual funds and hedge funds handle millions of dollars of investment capital, the managers have a great deal of responsibility. They must do sufficient market research to select stocks or bonds likely to perform well. They must generally be licensed brokers to purchase the stocks on behalf of the investors in the fund. The benefits of investing in such a fund is that there are larger amounts of capital available for investment than an individual investor would have, so the investor can own a piece of a large portfolio with diversified investments and benefit from the performance of those investments as a whole.