Many fund managers, whether they manage a mutual fund, trust fund, pension or hedge fund, have access to resources that the "average Joe" investor does not, but the kind and quality of information generally remains the similar for all investors.
The information that managers use comes from publicly accessible information in the form of news releases, annual reports and filings with pertinent exchanges. Fund managers will most expect have a team of financial analysts using the latest software to analyze specific firms, markets and economic variables, who will make recommendations and forecasts on future prices and market trends.
Even though these fund managers have access to all of these resources, the conclusions they come to about any particular security or market are potentially no enhanced than what a personal investor can do with a TV remote in one hand and a mouse in the other. The only difference between a fund manager and an individual investor is that the fund manager is highly trained and must stick on to a set of ethical standards.
Fund managers, and most analysts, go through a official training process, which will most likely include a CFA designation issued by the CFA Institute. The CFA program involves three rigorous levels of standardized testing, but in order to register in the CFA program you must hold, at a minimum, a recognized university degree. Also, to hang on to a CFA designation, the holder must stick on to the Code of Ethics and Standards of Professional Conduct, or else they may be suspended or expelled from the CFA society. In addition to their education and experience, fund managers will also have a systematic understanding of macroeconomics, international trade and behavioral finance, to name a few. Although it is not necessary to hold a CFA to be a fund manager, it is encouraged.
Although a fund manager's experience and education may afford him or her with an edge, a fund manager's actions may not be as apparent as they should be. The manager may make investments that are divergent to the best interests of the investors of that particular fund. For an instance, a pension fund manager may leverage the fund to purchase a security (this kind of strategy is illegal is most instances), but the investor will not be acquainted with the fund manager is doing this. In these circumstances, the possibility of losses is greater than if the manager took a non-leveraged position. (To learn more, read Understanding Dishonest Broker Tactics.)
Even though fund managers are highly trained professionals, they tranquil use the same publicly available information that all investors use, and the conclusions they come to are potentially no better than those achieved by any conscientious investor.
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