Investment management
Investment management is the professional asset management of various securities, including shareholdings, bonds, and other assets, such as real estate, to meet specified investment goals for the benefit of investors. Investors may be institutions, such as insurance companies, pension funds, corporations, charities, educational establishments, or private investors, either directly via investment contracts/mandates or via collective investment schemes like mutual funds, exchange-traded funds, or Real estate investment trusts.
The term investment management is often used to refer to the management of investment funds, most often specializing in private and public equity, real assets, alternative assets, and/or bonds. The more generic term asset management may refer to management of assets not necessarily primarily held for investment purposes.
Amount Available for Investment
The amount available for Investing oblige to use different type of investment and my not allow yet to reach directly an Investment manager.Most investment management clients can be classified as either institutional or retail/advisory, depending on if the client is an institution or private individual/family trust. Investment managers who specialize in advisory or discretionary management on behalf of private investors may often refer to their services as money management or portfolio management within the context of "private banking". Wealth management by financial advisors takes a more holistic view of a client, with allocations to particular asset management strategies.
The term fund manager, or investment adviser in the United States, refers to both a firm that provides investment management services and to the individual who directs fund management decisions.
The five largest asset managers are holding 22.7 percent of the externally held assets. Nevertheless, the market concentration, measured via the Herfindahl-Hirschmann Index, could be estimated at 173.4 in 2018, showing that the industry is not very concentrated.
Industry scope
The business of investment has several facets, the employment of professional fund managers, research, dealing, settlement, marketing, internal auditing, and the preparation of reports for clients. The largest financial fund managers are firms that exhibit all the complexity their size demands. Apart from the people who bring in the money and the people who direct investment, there are compliance staff, internal auditors of various kinds, financial controllers, computer experts, and "back office" employees.Key problems of running such businesses
Key problems include:- Revenue is directly linked to market valuations, so a major fall in asset prices can cause a precipitous decline in revenues relative to costs.
- Above-average fund performance is difficult to sustain, and clients may not be patient during times of poor performance.
- Successful fund managers are expensive and may be headhunted by competitors.
- Above-average fund performance appears to be dependent on the unique skills of the fund manager; however, clients are loath to stake their investments on the ability of a few individuals- they would rather see firm-wide success, attributable to a single philosophy and internal discipline.
- Analysts who generate above-average returns often become sufficiently wealthy that they avoid corporate employment in favor of managing their personal portfolios.
Representing the owners of shares
In practice, the ultimate owners of shares often do not exercise the power they collectively hold ; financial institutions sometimes do. Institutional shareholders should exercise more active influence over the companies in which they hold shares. Such action would add a pressure group to those overseeing management.
However, there is the problem of how the institution should exercise this power. One way is for the institution to decide, the other is for the institution to poll its beneficiaries. Assuming that the institution polls, should it then:
Vote the entire holding as directed by the majority of votes cast?
Split the vote according to the proportions of the vote?
Or respect the abstainers and only vote the respondents' holdings?
The price signals generated by large active managers holding or not holding the stock may contribute to management change. For example, this is the case when a large active manager sells his position in a company, leading to a decline in the stock price, but more importantly a loss of confidence by the markets in the management of the company, thus precipitating changes in the management team.
Some institutions have been more vocal and active in pursuing such matters; for instance, some firms believe that there are investment advantages to accumulating substantial minority shareholdings and putting pressure on management to implement significant changes in the business. In some cases, institutions with minority holdings work together to force management change. Perhaps more frequent is the sustained pressure that large institutions bring to bear on management teams through persuasive discourse and PR. On the other hand, some of the largest investment managers—such as BlackRock and Vanguard—advocate simply owning every company, reducing the incentive to influence management teams. A reason for this last strategy is that the investment manager prefers a closer, more open, and honest relationship with a company's management team than would exist if they exercised control; allowing them to make a better investment decision.
The national context in which shareholder representation considerations are set is variable and important. The USA is a litigious society and shareholders use the law as a lever to pressure management teams. In Japan, it is traditional for shareholders to be below in the 'pecking order', which often allows management and labor to ignore the rights of the ultimate owners. Whereas US firms generally cater to shareholders, Japanese businesses generally exhibit a stakeholder mentality, in which they seek consensus amongst all interested parties.
Size of the global fund management industry
Conventional assets under management of the global fund management industry increased by 10% in 2010, to $79.3 trillion. Pension assets accounted for $29.9 trillion of the total, with $24.7 trillion invested in mutual funds and $24.6 trillion in insurance funds. Together with alternative assets and funds of wealthy individuals, assets of the global fund management industry totalled around $117 trillion. Growth in 2010 followed a 14% increase in the previous year and was due both to the recovery in equity markets during the year and an inflow of new funds.the US remained by far the biggest source of funds, accounting for around a half of conventional assets under management or some $36 trillion. The UK was the second-largest centre in the world and by far the largest in Europe with around 8% of the global total.
Philosophy, process, and people
The 3-P's are often used to describe the reasons why the manager can produce above-average results.- Philosophy refers to the overarching beliefs of the investment organization. For example: Does the manager buy growth or value shares, or a combination of the two ? Do they believe in market timing ? Do they rely on external research or do they employ a team of researchers? It is helpful if all of such fundamental beliefs are supported by proof-statements.
- Process refers to how the overall philosophy is implemented. For example: Which universe of assets is explored before particular assets are chosen as suitable investments? How does the manager decide what to buy and when? How does the manager decide what to sell and when? Who takes the decisions and are they taken by committee? What controls are in place to ensure that a rogue fund cannot arise?
- People refer to the staff, especially the fund managers. The questions are, Who are they? How are they selected? How old are they? Who reports to whom? How deep is the team ? And most important of all, How long has the team been working together? This last question is vital because whatever performance record was presented at the outset of the relationship with the client may or may not relate to a team that is still in place. If the team has changed greatly, then arguably the performance record is completely unrelated to the existing team.
Ethical principles
Investment managers and portfolio structures
At the heart of the investment management industry are the managers who invest and divest client investments.A certified company investment advisor should conduct an assessment of each client's individual needs and risk profile. The advisor then recommends appropriate investments.