What do pension fund managers do? The only thing most employees know about them is that they take some of their hard- earned wages and invest the money, they hope, in a profitable manner.
The most essential part of the pension manager's job is to "know the market" -- not just the stock market, but the mutual funds market, the bond market, the money market, the real estate investment situation, and any other investment possibilities that could yield a good profit.
According to James Blair at Decatur, a mutual fund, the job is a lost broader than it used to be. The manager has more factors to take into consideration. For instance, the market is greatly influenced by political and social factors within the US and abroad. Today's manager is expected to know the big picture, or the macro-economic scene, as well as details of individual investments.
Raymond Colotti, president of Sperry Rand's Capital Management Corporation (a wholly owned subsidiary dealing in pension investments), says the role of the pension manager has changed dramatically since the Employee Retirement Income Security Act of 1974 went into effect. "ERISA marked the turning point in the role of the pension officer. Chiefly, it highlighted the importance of responsibility, coupled with prudence. The modern manager is younger and, within a corporation, holds a much higher position."
More important, explains Mr. Colotti, the pension manager has learned to mix investments according to the comfort levels of the company that employs him. He must have a long-term perspective. Rather than play the stock market every day, he must look to long-term securities that have the maximum profits and minimum risk.
It is essential for the pension manager, like all moneys managers, to outguess investing trends and patterns. Lynne Johnson, a money manager with Boston's Batterymarch, Financial Management Corporation, a management group that handles $5 billion, 90 percent of which is pensions, tries to find investments that are undervalued.She then moves part of the portfolios she manages into those stocks. Usually, if she is succesful at anticipating the market, when she checks the stocks a few days later she will find they have gone up.
"You have to be different, daring, adventurous," she says. "You have to operate on what you perceive as potential trends, not fads. You don't want to be moving your money around every hour according to fads, but you have to keep ahead. It's a very competitive job."
Dean LeBaron, president of Batterymarch, feels the necessary qualities of good money managers include motivation, creativity, and a good deal of egotism.
Frank Parrish, a manager and vice-president of Fidelity Management and Research Inc., explains that portfolio managing is a "risky" job. "The more volatile the investment, the more volatile the manager's position," he says.
There are several kinds of managers. If the pension manager is in-house -- meaning he's hired to manage the pension funds of only one company, usually from an office within corporate headquarters -- employees may know something about him and may even have the opportunity to discuss investment procedures with him.
If he is an outside manager, or a member of one of the major managing firms, chances are the employee has somewhat less contact with him -- except at annual review meetings or on special visits.
The job of the pension manager varies according to the size of the account, the number of accounts, the type of company he works for, and dozens of other factors.
For instance, pension managers employed by banks often have a more limited position than those who handle the pension fund of a single company. Bank managers tend to handle several accounts. They often personally don't research the companies the funds will be invested in. Rather, there is a research department that examines various securities and then an investment committee, using this information, presents the managers with a list. The manager's role would then be to allocate the money among the various investments.
The pension manager for a medium-size corporation may be responsible for the whole process -- research, allocation, keeping abreast of the investment market, and so on. Larger firms could have numerous pension managers handling a certain percentage of the company's investment funds.
Most managers are well educated, highly paid professionals. Dean LeBaron says most have the typical "Harvard-to-Harvard Business School kind of background."
Frank Parrish is more specific: "They are MBA holders graduated from the top business schools. They've been in research departments, banks, or on Wall Street to get their training.After about 5 or 10 years they might get into portfolio management. But it's a tough, highly paid, competitive field."
Does it bother the average pension manager to know he is working with someone's life savings and that he is responsible for any losses or failures?
"At first I was terrified," explains Batterymarch's Lynne Johnson. "But it's very impersonal -- it's much easier to manage someone else's money than your own."
Battermarch looks after the pension funds of such clients as the State of Oregon, the Rockefeller Foundation, and the Xerox Corporation. But what about in-house managers who may know the people whose money they deal with?
"I don't know if I could do it if I had to meet widows and orphans, or people who were really in tough spots," says Ms. Johnson.
But, maintains Frank Parrish, "Managing is the best job in the world."