Volume 12: 2nd Quarter 2010
“What Do You Do All Day?”
The Invisible Life of Investment Portfolio Managers
I was asked this question recently, by a gentle person who has been a client for many years. It occurred to me that observing your portfolio manager at work is a bit like watching an iceberg; the part you can see is a very small part of the whole entity.
So, just what is it that we portfolio managers do that isn’t seen, but is so important? Mostly, it is reading and listening and synthesizing information from a kaleidoscope of information sources. For example, my work day starts at 6:00 a.m. with the morning conference call where our New York trader, Paul Holman, gives us a synopsis of the overnight market action around the world, as well as economic news and earnings reports of stocks we own at First Republic. Bob Bloom, our chief market strategist, provides commentary gleaned from five or six research services and additional color on the current state of the stock markets, including his outlook for the near and intermediate term.
While the 10–15 minute conference call is on my speaker phone, I am uploading email messages from investment analysts and news sources. Usually, by 7:00 a.m., more than 50 emails will have been read, forwarded, filed or deleted. This is just the first wave of more than 100 emails a portfolio manager receives per day.
Occasionally, breakfast is a meeting time with the management team of one of the companies in which we have an investment or an interest, or an analyst who is visiting the West Coast. Most mornings, breakfast is a time to skim and read one or two of the multiple financial newspapers we see daily.
The rest of the morning is spent reviewing investment accounts, valuing individual securities for possible purchase or sale, and just general number crunching. Of course, during this period we are making or answering phone calls—everything from client investment inquiries to overdraft and cash management issues that need a quick reply. Since the stock markets close at 1:00 p.m. on the West Coast, any market activity we plan must be done by that time, which means that lunch normally doesn’t happen until after 1:00 p.m.
Two times weekly, we have scheduled investment research calls with First Republic investment professionals from around the U.S. These are times of robust discussion about current or new investment ideas, asset allocation decisions, and general market views in this rapidly changing investment climate. Additionally, from one to three times weekly, we have conference calls or meetings with outside investment managers who present information and ideas about stocks or funds that we are utilizing in client investment portfolios.
Reading and listening and analysis occupy the bulk of my days, but they are the necessary ballast that gives weight and insight to our investment action and our communication with our clients.
After contemplating the original question from my client, it became clear - reading and listening and analysis consume about 75–80% of my work day, gathering and winnowing information that can be used to enhance our decision making and investment process. The balance of the time is spent visiting with clients or prospects, discussing what we are doing, why we are doing it and occasionally, explaining what just happened.
Of course, with the advent of Blackberries and other electronic tethers, we are rarely completely away from breaking news and new information. The research is a never ending flow in our global world, so the length of our work days has expanded over the past few years. The good news is that most portfolio managers are information junkies. Soaking up information is not particularly unique, but the ability to separate the nuggets from the flow is very important, as is converting those ideas into investment action.
Bottom line: a portfolio manager is primarily a reader (speed reading helps!), a listener, someone who can formulate an investment plan from the information kaleidoscope and communicate in plain English with a valued client. An old adage from my boyhood was that “listening by the inch and talking by the yard will get me kicked by the foot.” A day in the life of a portfolio manager would be better described as “reading by the yard and talking by the inch;” however, we very occasionally do still get kicked by the foot. It’s all part of the day.
DISCLAIMER: Disclaimer/Disclosure First Republic Private Wealth Management encompasses First Republic Investment Management ("FRIM"), First Republic Wealth Advisors ("FRWA"), First Republic Trust Company ("FRTC") and First Republic Securities Company, LLC ("FRSC"), Member FINRA/SIPC. FRIM, FRSC and FRTC are a wholly-owned subsidiaries of Bank of America N.A. FRIM is a SEC Registered Investment Advisor. This document is for information purposes only and is not intended as an offer or solicitation, or as the basis for any contract to purchase or sell any security, or other instrument, or to enter into or arrange any type of transaction as a consequence of any information contained herein. All analyses and projections depicted herein are for illustration only, and are not intended to be representations of performance or expected results. The results achieved by individual clients will vary and will depend on a number of factors including prevailing dividend yields, market liquidity, interest rate levels, market volatilities, and the client's expressed return and risk parameters at the time the service is initiated and during the term. Past performance is not a guarantee of future results. Investors should seek financial advice regarding the appropriateness of investing in any securities, other investment or investment strategies discussed or recommended in this report and should understand that statements regarding future prospects may not be realized. Although information in this document has been obtained from sources believed to be reliable, we do not guarantee its accuracy, completeness or fairness, and it should not be relied upon as such. This document may not be reproduced or circulated without our written authority. The investment services and products mentioned in this document may often have tax consequences; therefore, it is important to bear in mind that FRIM does not provide tax advice. The levels and bases of taxation can change. Investors' tax affairs are their own responsibility and investors should consult their own attorneys or other tax advisors in order to understand the tax consequences of any products and services mentioned in this document. Products and/or services offered by First Republic Securities Company, LLC, and First Republic Investment Management are not deposits or obligations of, or insured, guaranteed or endorsed by any bank, Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other agency, entity or person. The purchase of securities involves investment risks including the possible loss of principal.