What is an Investment Manager? Meaning, Roles & Skill

Key Takeaways:

Investment managers are individuals or organizations responsible for managing security portfolios on behalf of their clients. These professionals, also known as fund or asset managers, handle various tasks related to portfolio management or asset management, always considering the investment objectives, time horizons, and risk profiles of their clients. There are three primary types of investment managers: Personal Fund Managers, Business Fund Managers, and Corporate Fund Managers. Additionally, Robo-advisors, which are automated online platforms, use algorithms to make investment decisions, offering a modern, digital approach to investment management.

Let’s begin with understanding about different aspects of investment management and then explore investment managers.

What is Investment Management?

While there’s no universal definition of investment management, it generally refers to the process of making informed decisions regarding investments. This involves researching, selecting, and overseeing a portfolio of assets that align with an investor's objectives, risk tolerance, and time horizons. The scope of investment management includes a variety of investment opportunities for both individuals and institutions, aimed at wealth growth through assets such as stocks, bonds, real estate, and other classes. Key activities include buying and selling assets, formulating short- and long-term investment strategies, creating tax strategies, and managing asset allocation. Additionally, it can encompass other financial tasks such as banking and budgeting.

Why is Investment Management Important?

A few pointers that’ll help you understand the importance of investment management are:

Facilitate Achievement of Your Goals
Investment management can streamline your path to financial goals. The right strategy reduces stress and enhances stock market navigation. Tools like mutual funds and ETFs offer easy diversification. Personalized services provide tailored financial plans and asset advice, especially beneficial for retirement planning.
Understand Your Investments
Understanding your investments is crucial to align them with your financial and ethical goals. Conducting research beforehand ensures transparency about where your money goes and its impact. Investment management goes beyond returns; it involves making informed decisions that benefit both you and others.
Effectively Managing Investment Risks
Building wealth through investing requires effective risk management, involving thorough research, planning, and strategic decision-making. Use risk analysis tools or develop your framework to minimize losses and enhance long-term investment success.
Enhance Your Financial Decision-Making
Define financial goals, seek advice from professionals to diversify and align your portfolio with aspirations. Research and understand risk tolerance for informed decisions and a secure financial future.

Investment Management Objectives

Ideally, the objectives of investment management for most investors include:

Assess and Manage Risk: Evaluate and mitigate risks associated with investments to protect capital and optimize returns.
Establish Goals: Define clear financial objectives and timelines to guide investment strategies effectively.
Select Investments: Carefully choose assets and securities that align with risk tolerance and long-term financial goals.
Monitor Progress: Regularly review portfolio performance and adjust strategies as needed to stay on track with goals.
Maximize Returns: Strive to achieve optimal returns while balancing risk exposure through informed investment decisions and strategies.

How Does Investment Management Work?

The process of investment management can be explained as follows:

Establish Investment Goals: Begin by defining clear financial objectives, including timelines and risk tolerance levels, to guide your investment strategy effectively.
Develop a Plan: Develop a comprehensive investment plan that outlines specific steps and strategies to achieve your goals, considering factors like asset allocation and, diversification, and asset management.
Uncover and Choose Your Investments: Conduct thorough research to identify investment opportunities that align with your plan and risk profile. Select assets that offer potential for growth while managing risk.
Track Your Portfolio: Regularly monitor the performance of your investments to assess progress towards your goals. Stay informed about market trends and economic developments that may impact your portfolio.
Rebalance Your Portfolio: Periodically adjust your asset allocation to maintain desired risk levels and align with changing market conditions. Rebalancing ensures your portfolio remains diversified and optimized for long-term growth.
Stay Informed: Continuously educate yourself about investment strategies and market dynamics. Stay updated with the latest financial news and insights to make informed decisions and adapt your plan as needed.

What is an Investment Manager? What Are the Types of Investment Managers?

An investment manager oversees the investment portfolios of clients, employing various strategies to enhance returns and expand their assets. They are alternatively known as portfolio managers, asset managers, or wealth managers, and while they may provide financial advice, their primary focus lies in optimizing investment performance rather than sales activities.

Types of Investment Managers

Investment managers for funds are broadly classified into three types:

Personal Fund Managers
Business Fund Managers
Corporate Fund Managers

Each of these fund managers deals with a specific fund type as experts in their fields. Generally, personal fund managers deal with a smaller quantity of funds and work with multiple clients. As a client hiring an investment manager, you must consider factors such as the reputation of the manager, the fees they charge, their clientele, and so on.

What Does an Investment Manager Do?

The role of an investment manager involves financial planning, undertaking research, investing, day-to-day buying and selling of securities, portfolio monitoring, and more. They, first, analyze your current financial status and accordingly set reasonable financial goals. Then, based on these goals, they devise strategies and conduct trades within portfolios to bring the best returns for you.

Moreover, they help answer any questions and concerns, offer valuable investment advice, and help you make tough financial decisions. In simple words, investment managers assist with wealth augmentation through strategic investments.

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Key Responsibilities of an Investment Manager

Investment managers are at the heart of the investment industry and are responsible for investing and bringing good returns for their clients. Their key responsibilities include:

Portfolio Diversification

A significant feature of investment, portfolio diversification is a crucial responsibility of the investment manager. Diversifying ensures adequate risk distribution and a good balance between assets and liabilities, influencing investing decisions in stocks and bonds.

Asset Allocation

Asset allocation involves investing funds in bonds, stocks, real estate and commodities. The amount of money you invest and the securities in which you invest, also known as asset classes, significantly impact the performance of the funds. Through asset allocation, you can determine the efficiency and success of a fund and the possible returns it can generate.

Research & Review

A crucial responsibility of an investment manager is to keep researching and staying up to date with the changing trends in the investment market. The manager must stay apprised about the state of the economy, study and be aware of the various financial products available, and present relevant investment opportunities.

Skills Needed in an Investment Manager

To become an investment manager for funds, one requires an undergraduate and a master’s degree in business, economics, or finance. However, a degree can only help so much. The investment manager must also possess special innate skills to succeed in their role. These include:

Clear Communication

Investment management involves numbers and complex data. Thus, all managers should possess the skills to communicate their analysis and data to clients in a simplistic, sensible way.

Decisiveness

In the course of a business relationship, the investment manager will usually have the final say in several decisions. Therefore, managers need to be confident and make effective decisions on behalf of their clients whenever the need arises.

Mathematical Abilities

Investment managers work through tons of research every day. So naturally, they should be comfortable with numbers and good at math to identify trends and patterns quickly.

Practical Knowledge

Good investment managers must be aware of the intricacies of investments. They should know how to take calculated risks and explore new investment opportunities. They must base their investment decisions only after zanalyzing and predicting data.

Performance and Fees of an Investment Manager

The compensation or fees payable to an investment manager can be either management fees or performance fees, or a mix of both.

The fees that investment managers charge clients for managing specific investment funds are known as management fees. These fees typically compensate the managers for their time and expertise in managing a portfolio. However, they also include other expenses such as investor relations expenses and any administrative costs.

Investment managers also charge performance fees for generating good returns. Thus, it is unlike management fees which are paid to the managers irrespective of returns. Generally, performance fees are a certain percentage of the investor profits (zrealized and unrealized) or a percentage of the amount invested. Profit percentages are especially common among hedge fund investments.

How is an Investment Manager Different from a Fund Manager and an Investment Adviser?

Aspect	Investment Manager	Fund Manager	Investment Adviser
Primary Role	Manages a client's investment portfolio to achieve specific financial goals and objectives.	Manages pooled funds (mutual funds, hedge funds, etc.) on behalf of investors to generate returns.	Provides advice and recommendations on investment options and strategies to individual clients or institutions.
Client Relationship	Directly manages investments on behalf of clients, often with discretionary authority.	Manages funds on behalf of multiple investors who own units/shares in the fund.	Provides non-discretionary advice and recommendations to clients, who make final investment decisions.
Scope of Control	Exercises control over individual client accounts, making investment decisions based on client goals and risk tolerance.	Has control over the investment decisions within the fund's mandate, adhering to fund objectives and policies.	Provides advice and guidance but does not have direct control over client assets or investment decisions.
Compensation Structure	Typically earns fees based on a percentage of assets under management (AUM) or performance-based fees.	Earns management fees from the fund, usually a percentage of AUM, and may earn performance-based bonuses.	Charges fees based on advisory services provided, often as a percentage of AUM or flat fees for consultations.
Regulatory Requirements	Subject to regulatory oversight and may require licenses or registrations depending on jurisdiction.	Subject to stringent regulatory oversight, including compliance with fund management regulations and disclosures.	Subject to regulatory requirements that may include licensing and adherence to fiduciary standards, depending on jurisdiction.

Online Investment Managers

With the advancement in technology, it is no surprise that financial services have also gone digital. Today many investment management firms offer Robo-advisory services, also known as online investment managers. These are automated investment platforms that make investment decisions based on algorithms. We can also call them a digital asset management solution. They help do all the legwork and are highly convenient, accessible, and affordable too. If you are a novice investor looking for a reasonably priced investment manager, then an online manager may just be the right fit for you! That said, you must do your due diligence and research before hiring a human or robotic investment advisor.

For safe and seamless online investments in India, choose DBS, Asia's Safest Bank. Besides other products and services, take advantage of our professional services like Investment Management and Investment Banking to manage your money in the most effective way possible.

Frequently Asked Question

Is investment management the same as investment banking?

Though they may seem similar, they are two different concepts.

Investment management involves managing clients' portfolios to achieve financial goals, including asset allocation, equity research, and buy/sell recommendations, focusing on growing and protecting wealth through diversification.

On the other hand, investment banking focuses on corporate finance, raising capital, facilitating mergers and acquisitions, and providing financial transaction advisory services. Investment bankers help companies access markets, underwrite securities, and manage financial restructuring.
What is the difference between finance and investment management?

Finance is a broad field encompassing the management, creation, and study of money, investments, and financial systems, including banking, credit, and risk management. Investment management is a subset of finance focused specifically on managing investment portfolios for individuals or institutions to achieve specific financial goals, involving asset allocation, financial analysis, and equity research to grow and protect wealth.
Is investment management the same as wealth management?

No, investment management and wealth management are not the same. Investment management focuses on managing investment portfolios to achieve financial goals through asset allocation and financial analysis. Wealth management is broader, encompassing investment management, financial planning, tax planning, estate planning, and other services to manage an individual's entire financial situation. Additionally, it aims to grow and protect overall wealth, addressing various aspects of a client's financial life.