The growth of the finance industry saw the emergence of investment management as a popular career choice. But what does this role entail? This blog takes you through what it is like to be an investment manager, and hopefully piques your interest in finding out more about this industry!
Put simply, funds management is the management of a company’s funds. Also referred to as asset management or investment management, it is the process of handling, overseeing, and maintaining financial assets. Typically, a client will place their money with an investment manager, who then invests it on the client’s behalf with the aim of maximising risk-adjusted returns. This process also entails the systematic management of financial risks such as credit, market, and liquidity risks. In finance jargon, investment management belongs to the “buy-side” of the industry.
There are many types of funds operated by fund managers. These could include:
Mutual funds pool finances from various investor groups and create various investment portfolios, managing these on behalf of their investors.
Hedge funds pool finances from investors and make a range of different opportunistic, often risky, investment strategies in pursuit of high returns.
Superannuation funds invest the retirement savings of members to secure a comfortable sum for retirement.
Investment managers also can be distinguished by their investment styles. Some examples include, but are not limited to:
Growth: Investment managers select companies with the highest growth potential and are prepared to pay a premium for these securities. These tend to be procyclical, outperforming when the market is bullish but trajectory downwards when the market is bearish.
Value: Investment managers who emphasise value look for securities which are under-priced. These managers then buy the securities at a low price, holding them until they rise to reach fair value before selling.
Fundamental: This is a more defensive style which seeks to match the returns of the portfolio’s benchmark market index. Investment managers will typically hold a large, diversified portfolio to achieve this effect. While upward potential may not be as high as growth or value styles, this approach is safer during downturns.
Quantitative: Investment managers rely on computer-based models and algorithms to track trends in the price and profitability of target securities and identify assets which could perform well.
Hopefully that has provided with an overview of the investment management industry! For more information on the typical day in the life of a portfolio manager, check out this video from the CFA Institute!
