Finding the best investments on the market is a full-time job – it’s no surprise people pay investment management firms to do it for them. Put simply, investment management firms invest their clients’ money and manage it accordingly, they do portfolio management or private banking – covers the professional management of different securities and assets, such as bonds, shares, real estate and other securities. They also specialize in asset allocation, financial statement analysis, stock selection, monitoring of existing investments and plan implementation. Proper investment management aims to meet investment goals for the benefit of the investors.
They choose the right selection of investments - from fast-growing, risky stocks to safe but slow-growing bonds. The aim is to achieve the return the client needs at a level of risk they’re comfortable with. The revenue of investment management firms is directly linked to the market's behaviour. Different asset management firms do different things. Some are generalists - they are enormous enterprises that design financial services or products they think investors will snap up in the marketplace. Some are specialists, focusing on one or a handful of areas, which is what we are doing because we're only interested in working with fellow long-term investors who believe in a value investing or passive investing approach. Some only cater to the rich through private accounts (aka individually managed accounts) or hedge funds. Some focus exclusively on launching mutual funds. Some build their practice around managing money for institutions or retirement plans, such as corporate pension plans. Some asset management companies provide their services to specific firms, such as for a property and casualty insurance company.
Investments range from cash deposits and government bonds to shares in new companies with unpredictable futures. An Investment Management Firm needs to be aware of the possibilities and calculate the investment risks and returns of each. There is a pattern, each client needs a portfolio of investments that match their specific goals. A diverse portfolio, with investments spread across many different assets, reduces risk – it’s a case of not putting all your eggs in one basket.
That’s the basic outline of an investment firm’s business. There are a huge number of ways to go about it. Firms might manage investment funds for multiple investors. They might invest in private equity. And there are other tasks for the firm, such as business development and marketing, IT, pricing and accounting. Off lately there has been a subsequent growth in the number of Investment Management Firms based on the need of target groups in the market.