Investment management is the maintenance of an investment portfolio or a set of economic assets with the intention of achieving a specific financial goal. It can include purchasing and selling assets, creating medium-term or long-term investment strategies, overseeing a portfolio’s asset allocation, and developing an optimal tax strategy. Portfolio management and asset management are other terms that broadly check with services that provide oversight of a client’s investments. Investment management, however, is not just about handling specific assets in the very portfolio. It also includes ensuring the portfolio continues to align with the client’s goals, risk tolerance, and financial priorities.
Investment management may be done independently or with an investment manager’s help. Since most people do not have the time or understanding to manage investments on a daily basis themselves. It makes sense to outsource this part to a professional. Investment management is not something that only the well-off can afford. And even the average investor can (and should) access professional expertise through regulated products.
An investment management service may be offered by a person. Or company that manages an investment portfolio on behalf of a client. There are various forms in which this might be achieved – as a pooled product, customised solution or as advice.
The most common form of investment management is offered through products, such as Mutual Funds or Exchange Traded Funds (ETFs) or pension funds. These are generally pooled products, where several investors put their money in an investment strategy with a defined mandate. They are generally run by professional investment management companies with defined processes and risk management. The investment manager makes all decisions with respect to where to invest, what and when to buy or sell, and monitoring performance.
The next form is one where a customised strategy or solution is designed based on the needs and profile of the investor. By definition, these are generally customised based on the priorities and financial goals of the investor. And may or may not be suitable for other investors. Think of an entrepreneur who has recently made a lot of wealth through their business. And now wants to preserve and grow her wealth. What she will be looking for is a detailed plan on how to divide her wealth between various assets and products. And how to optimize for returns vs risk and liquidity. These kinds of solutions are offered by various institutions such as asset managers, wealth managers, private banks and standalone advisors.
The final form is one where the investment manager or adviser simply provides advice. And the decision-making is done by the investor herself. The scope of this could be very broad, ranging from advice on portfolio management products, asset allocation, alternative investments or tax strategies.
Depending on the wishes and needs of a client. The Investment manager will choose the investment management style for a portfolio. There are many advantages and disadvantages to each style, and investment managers often combine them to maximize their potential.
