Holly Black: It's back to school week at Morningstar and to help cover all the investment basics we have brought back our team of young experts. Luckily, they are as good at technology as they are at grilling our analysts.
Alex Gard: Hello. My name is Alex Gard. And today, I'll be talking to Dan Kemp about fund managers. Hi, Dan.
Dan Kemp: Hello, Alex.
Gard: What is a fund manager?
Kemp: So, a fund manager is somebody who gathers together money from lots of different people and uses that money to make investments. And so, instead of a single person making the investment, a fund manager will typically look after money from lots of different people. And the rules of what they are able to invest in are governed by the type of fund that they run. So, there's lots of different types of funds, lots of different fund managers but they are all trying to deliver a good return on the money that's given to them by investors.
Gard: What does a fund manager do all day?
Kemp: That is an excellent question, Alex. And there's really four things that a fund manager does over the course of the day. The first thing is that they do a lot of reading and thinking about where they should invest the money that's been trusted to them. And we tend to call that research, the most important thing that a fund manager does but also the thing that takes most of their time. But alongside that they have to make decisions about where to invest and how much to invest in different types of assets, different types of investments. That's a key part of their role. And the third thing is that they actually have to make those investments. So, they buy, and they sell investments. And normally, they are helped doing that by specialist traders.
But nevertheless, they have to make the final buying and selling decisions. And then, the fourth thing that they do is communicate what they are doing and how the investments that they've made are performing to the people who have given them the capital to invest. And so, that helps those people, the end investors, the one's whose money it is, understand what's happening with their money but also decide whether that's the right fund manager for them.
Gard: Okay. Why do people need fund managers?
Kemp: Well, there's many reasons why people might need a fund manager. The first reason is that people may not have the time to make all of those investments themselves. So, remember I said that the most important part of the job is research, doing a lot of reading and thinking. Not everyone has time to do that. And so, they can use a fund manager to do that work for them. The second is that even if people have time to make those investments, they may not have the experience or the expertise to do it really well. And so, by giving their money to a fund manager who is very experienced and is very knowledgeable, then they could hopefully do a better job.
Gard: Thank you for your time, Dan. For Morningstar, I'm Alex Gard.
