Mutual Fund Analysts

A mutual fund is a professionally managed investment pool that is sold to the public through the sale of shares representing an ownership interest. Most mutual funds can be classified into one of three categories—stock funds (also called equity funds), bond funds (also known as fixed income funds), and money market funds—although some funds feature a mix of these categories. Portfolio managers select securities that best match the objectives of the fund they manage, generally to achieve the highest return on investment at an acceptable level of risk. Analysts conduct research to help portfolio managers decide which stocks, bonds, and money market funds should be included in a new portfolio, or added to or dropped from an existing portfolio. They generally focus on trends affecting a specific industry, region, or type of product. For example, an analyst will focus on the biotechnology industry, northern Europe, or the bond market. Firms with larger research departments assign analysts even narrower subject areas, such as a specific country (such as Japan) or company (General Dynamics Corporation). Job duties vary by employer, but most analysts:

• conduct extensive research on companies, market sectors, geographic regions, or companies assigned to them
• present and defend investment recommendations on individual companies to portfolio managers
• maintain databases of historical and current financial statements of the firms they cover
• run financial models and perform valuation analysis based on research reports and other published sources; press releases; conversations with company management; and data gathered at conferences and trade shows or via conference calls with company officers
• talk to analysts at credit rating agencies (Standard & Poor’s, Moody’s, or Fitch Ratings) or sell-side analysts at investment banks to better understand securities they rate as well as market trends
• evaluate macroeconomic fundamentals that could impact the investment such as interest rate policy, geopolitical concerns, and current account dynamics
• communicate portfolio considerations and investment updates to the broader investment team
• prepare oral and written reports that summarize their recommendations
• attend daily investment meetings with fellow analysts and portfolio managers

One fast-emerging subspecialty is quantitative analyst. These professionals develop and continuously improve on mathematical models and use advanced artificial intelligence to review data, draw conclusions, and make recommendations regarding the valuation, acquisition, and trading of stocks, bonds, and other financial instruments. Their work is driving the rapid-fire, high-frequency trading now dominating daily trading activity in the U.S. equity markets.