I was thinking about mutual funds and how their performance is based on the decisions made by those who manage it. How does this work on a practical level?
I had an image in my mind of this:
(scene in an employee break room) (the scenario is made up, and is not in any way intended to be investment advice)
Joe: “Hey Bill, what’s up?”
Bill: "I’m working on a PowerPoint presentation for Wednesday’s meeting for the Large Cap Enterprise Management Funds IIa fund. The presentation is called “IBM, a Dinosaur About To Fall.”
Joe: “Oh, you really think the fund should sell its IBM stock?”
Bill: “Yeah. According to these reports <shows reports> my sister sent me, the last two times we had a Democrat in the White House, IBM stock tanked in the President’s third year.”
Joe: “Good luck, I hear that Jeff, the Program Manager, personally owns over 500k in IBM stock and he isn’t going to want to hear about how it is about to fall.”
I.e., how is it decided what mutual funds will buy or sell what? I understand that it could vary between funds - are there funds that are very organized and methodical with layers and layers of projective reports, essays, studies, meetings, votes, managerial approvals, and attorney reviews before anything about the fund is changed, and others where they just have one account manager who buys and sells pretty much according to their professional judgment, and the manager’s employee review takes into account how much he actually made? E.g. “This is your employee orientation. You are the manager for the Providence Excelsior Funds VIb. The portfolio looks like this : $1M cash, 50000 shares Microsoft, 10000 shares Ford, 5000 shares Nabisco, and 2000 shares ExxonMobil. Increase the value of the fund, you will be reviewed in 1 year.”