A portfolio manager (PM) is a professional responsible for making investment decisions and carrying out investment activities on behalf of vested individuals or institutions. Clients invest their money for future growth, such as a retirement fund, endowment fund, or education fund. PMs work with a team of analysts and researchers and are responsible for establishing an investment strategy, selecting appropriate investments, and allocating each investment properly towards an investment fund or asset management vehicle.

In the 1950s, Harry Markowitz, an American economist, developed the modern portfolio theory. Jack Treynor (1961, 1962), William F. Sharpe (1964), John Lintner (1965) and Jan Mossin (1966) later build the Capital Asset Pricing Model (CAPM) on the theory of Markowitz. Nowadays, the CAPM is one of the primary portfolio management tools. The formula calculates the potential return percentage of an investment vehicle based on its vested risk appetite. The formula is:

${\displaystyle \mu _{i}=r_{f}+(\mu _{M}-r_{f})*\beta _{i}}$

where:

The goal of an investment manager is to earn a greater return than the return expected given the level of risk. This return can be monitored by investors through weekly, monthly, quarterly, or yearly performance reports that are shared by the PM. The manager may set up a performance benchmark or track their investment strategy alongside an index. The investment policy shared by the manager outlines investment details, such as minimum investment requirements, liquidity provisions, investment strategy, and the markets the manager will be actively investing in.

Institutional investors include fund of hedge funds, insurance companies, endowment funds, and sovereign wealth funds. Individual investors include ultra-high net worth individuals (UHNW) or high net worth individuals (HNW).

Portfolio managers make decisions about investment mix and policy, matching investments to objectives, asset allocation for individuals and institutions, and balancing risk against performance. Portfolio management is about strengths, weaknesses, opportunities, and threats in the choice of debt vs. equity, domestic vs. international, growth vs. safety, and other trade-offs encountered in the attempt to maximize return at a given appetite for risk.

Portfolio managers are presented with investment ideas by internal buy-side analysts and sell-side analysts from investment banks. It is their job to sift through the relevant information and use their judgment to buy and sell securities. Throughout the day they read reports, talk to company managers, and monitor industry and economic trends, looking for the right company and time to invest the portfolio's capital.