What Does a Fund Manager Do? Responsibilities & Skillset
The modern fund manager in the private markets
Understand the core responsibilities of a fund manager in private equity and venture capital. This guide covers your role throughout the fund lifecycle, from investment strategy and fund operations to LP relations and compliance.
What does a fund manager do?
In the private markets, a fund manager is the professional or firm responsible for overseeing private investment funds, which are pooled investment vehicles. Their primary job is to use capital raised from investors to buy stakes in private companies, with the ultimate goal of generating financial returns for those investors.
The key players in this structure are the general partners and the limited partners. A general partner (GP) acts as the fund manager, making the investment decisions and actively managing the fund. Limited partners (LP) are the investors who provide the capital for the fund but are not involved in its day-to-day management.
Managing the fund lifecycle
A fund manager's responsibilities extend across a multi-year journey known as the fund lifecycle, a process that can extend for a decade or more.
The typical fund lifecycle includes:
- Formation: Handle fund formation, legally structure the vehicle, and define its investment strategy.
- Fundraising: Use an investor pitch deck to present the fund's strategy to potential LPs.
- Investing: Begin deploying secured capital, sourcing potential deals, performing due diligence on target companies.
- Managing: Work with the leadership of your portfolio companies (portco).
- Exiting: Sell the fund's investments through an acquisition (M&A) or an initial public offering (IPO).
Fund manager responsibilities
To navigate every stage of the fund lifecycle, you must develop expertise across several distinct areas. These pillars represent the core competencies required to operate a successful fund in today's complex private markets:
Investment strategy and portfolio management
The essential skills include:
- Financial acumen: Understanding a company's financial health and future potential using key fund performance metrics.
- Operational discipline: Managing complex back-office processes.
Fund operations and administration
You are responsible for back-office duties including fund accounting, preparing investor reporting, managing tax compliance, and ensuring audit readiness.
LP relations and fundraising
Building and maintaining strong relationships with your LPs is critical for capital raising and investor communication.
Firm management and compliance
You are responsible for managing the budget, salaries, and ensuring compliance with relevant financial regulations such as anti-money laundering (AML) and know your customer (KYC).
How fund manager responsibilities differ across PE, VC, and private credit
Key differences in responsibilities are based on the asset class.
| Private equity fund managers | Venture capital fund managers | Private credit fund managers | |
|---|---|---|---|
| Investment strategy | Acquire majority ownership of mature companies. | Purchase minority stakes in early-stage startups. | Deploy capital into debt instruments. |
| Value creation | Focus on operational improvements. | Build market share and strategic guidance. | Generate returns through interest income. |
| Portfolio management | Manage fewer companies with significant control. | Collaborate with a larger number of companies. | Monitor debt compliance across borrowers. |
| Fund size | Typically raise larger funds. | Often raise smaller funds. | Can vary widely based on strategy. |
The skillset of the modern fund manager
The role of a fund manager has evolved, requiring:
- Strategic insight: Identifying market trends and guiding portfolio companies to successful exits.
- Technological fluency: Using modern software for efficient fund management.
Frequently asked questions about fund managers
How are fund managers compensated?
Typically through a combination of management fees and carried interest.
What is the difference between a fund manager and a portfolio manager?
A fund manager oversees the entire fund management strategy while a portfolio manager focuses on a specific collection of investments.
What are the different types of investment funds?
Various types of investment vehicles exist, including hedge funds and mutual funds, each prioritizing risk management and diversification.