An Overview of the Investment Management Industry
What are Fund Managers? Investment managers are professionals who supervise the management of investment funds. Investment management is basically the financial expert skillfully handling of different securities, such as bonds, shares, and other related assets, for the financial benefit of investors. This financial skill is one of the main factors determining the success or failure of an investment project. Fund managers are responsible for determining the allocation of capital among many securities for achieving specific financial goals and objectives.
Fund managers are basically hired by brokerage firms, banks, asset management companies and insurance companies to manage their clients’ capital for investment purposes. This includes but not limited to the investment in securities like stocks, options, futures, securities, mutual funds, real estate securities and even derivatives like credit default swaps, interest rate swaps, and mortgage bonds. The primary duty of a fund manager is to coordinate and synchronize the assets owned by the client and those owned by the manager. He or she also plays a major role in ensuring that the funds are appropriately invested in accordance with the stated investment objectives.
Managers are also responsible for evaluating the performance of their clients’ investments to ensure that investments are yielding high returns. Allotment of funds is done according to predetermined criteria such as risk-adjusted return and projected returns. These investments are typically sold to institutional investors who have the power to exercise full control of the portfolio’s use. They usually invest on behalf of the account holders of the brokerage firm. Fund managers have to be highly experienced and possess an impeccable record of sound financial judgment, because all purchases and sales of securities are made based on his or her evaluations of risks, the risk factors associated with the investments, the possible return on the investments, and the fees charged by the brokerage firm for managing the client’s investments.
The basic function of Fund Managers is to execute financial transactions for their clients. In general, they are also responsible for ensuring compliance with applicable laws and regulations regarding investments, maintaining proper records pertaining to such transactions, and advising their clients concerning significant decisions regarding their investments. Some fund managers are also involved in investment management as an inactive co-owner or as an investment advisor. This basically means that they are allowed to participate in the buying and selling of securities under their own name. Nevertheless, all investors need to know that this option should not be used by investors who are planning short-term and long-term investment strategies, as it will deprive them of liquidity and may lead to disastrous consequences.
Apart from acting as financial advisors, fund managers can also be involved in the process of creating investment plans and strategy. They are therefore required to have sound knowledge on financial instruments. The investment management industry is booming with a large number of people taking up the profession every year. As a result, competition among the various firms offering this type of services is heating up.
Fund managers are constantly faced with issues pertaining to their investments. One of these is over-all performance, which is also known as net asset value (NAV). Over-all performance of a particular portfolio depends on the total returns that the investors have earned in it. The managers of funds earn higher returns if the total returns earned by his fund are higher than the actual costs incurred in purchasing assets.