Who Is An Investment Manager?
Investment is the process of redirecting finance towards profit generation. Investment management involves the professional management of various financial securities and assets belonging to an investor for the purpose of earning maximum benefits. An investment manager is an individual who manages investor finance and focuses on yielding future benefits for the investor. Investment managers manage investment portfolios and operate under the government’s securities legislation.
An investment manager is usually part of a large financial institution: a bank, a trust, or a life insurance company. Investment managers manage the investment portfolios of these institutions, and may also provide direct investment management services to third-party clients. Since investment managers are required to manage money for investors, they are also involved in ‘investment counselling’. Investment management companies providing this service are required to license their investment managers as ‘investment counsellors’ or ‘investment counsels’. An investment manager involved in counselling is also expected to have completed at least the first year of the CFA programme, and to hold relevant professional experience in the investment industry.
Investment managers are also known as ‘fund managers’. The term fund or investment manager refers to both an individual who helps direct investment management decisions, and institutions providing financial services.
What Does Investment Management Involve?
Investment management involves the following processes:
Setting investment objectives: Investment goals will differ depending on who invests and the purpose behind the investment. Investments can be made by financial institutions, such as banks, pension funds, insurance companies, etc. Investments can also be made by private investors focused on generating high returns on investments. Investment managers help set investment objectives depending on investor decisions.
Formulating an investment plan: Following the setting of an objective for investment, investment managers help formulate a plan for investment. An investment manager will draw up investment plans based on factors like risk profile, financial capacity of investors, market factors and economic conditions, and in line with government regulations.
Establishment of the portfolio strategy: An investment manager will weigh the objectives and constraints and classify asset classes accordingly. Asset classes include financial securities (fixed income, foreign), debts, equities, currencies, and / or real estate (commercial and residential). An investment manager is responsible for selection of assets for investment from the asset classes.
Since investment management is an ongoing process, investment managers are expected to consistently evaluate and improve their investment portfolios.
Role of an Investment Manager
Every individual interested in securing his / her future through investment, practices investment management. An investor will need to save money, draw up a budget, spend wisely and invest a substantial sum towards buying high profit potential assets or financial securities. But while every one can make investment decisions, not everyone should. An investment manager is a professional who specialises in investing and is qualified to take the right decisions; placing money in the best profit yielding instruments to accomplish goals and predetermined targets. Hiring a competent investment manager is essential if one wants to invest in the financial market.
An experienced investment manager will help investors in the following ways:
- Discern the best strategy for investments
- Analyse status of finance, and assist in asset and stock selection
- Monitor investments on an ongoing basis
- Help gain maximum benefits from investments
- Provide advice on investment areas
- Handle investor decisions and investments with the utmost discretion
Types of Investments and Investment Managers
Investment management is often described in terms of fund management, asset management, money management, wealth management, portfolio management and advisory investment management. Fundamentally similar, they have a few minute differences. Investment managers involved in these different areas of investment management have specific responsibilities to fulfil.
Asset (Portfolio) Management and Asset Investment Managers: The term asset management refers to the management of collective investments made in multiple investment options on behalf of groups of investors, e.g. mutual funds. An asset investment manager is required to make decisions that will result in the maximum returns possible. The decisions taken by an asset or portfolio investment manager should be based on well-researched information, financial profitability, predetermined investment targets and availability of resources.
Money Management and Money Investment Managers: Money investment managers may manage a client’s investment portfolio without his / her approval, e.g. mutual funds. This form of investment management is known as ‘discretionary’ money management. The money investment manager manages the investment portfolio independently; sets goals, builds budgets, cuts down on unnecessary expenses, saves money and makes investments based on the investor’s risk constraints. Money investment managers are focused on achieving profits for the investor’s current and future stability.
Wealth (Portfolio) Management and Wealth Investment Managers: Private investors, typically wealthy individuals, will invest money in the capital market. A wealth or portfolio investment manager manages the investment accounts of such high-net worth individuals.
Advisory Investment Management and Investment Advisors or Advisory Investment Managers: An advisory investment manager offers investment recommendations and suggestions regarding investments; where to invest, when to invest, how to invest, when to sell securities, and so on. Advisory investment managers may either provide asset management services on behalf of corporate investment firms, or directly manage a client’s assets. Hiring good advisory investment managers ensures the efficient management of investor finances and high returns on investments.