The provision of investment management services includes elements of financial statement analysis, asset selection, stock selection, plan implementation and ongoing monitoring of investments. Investment managers, also known as fund, asset or portfolio managers, are those responsible for this activity, and are employed by numerous entities including:
Banks Investment banks Stockbrokers Life assurance companies Insurance companies
They’re also employed by investment management companies – firms dedicated to the handling of financial assets and securities on their clients’ behalf.
Investment Management Companies: A List
Some of the world’s largest investment management companies include:
BlackRock Goldman Sachs JP Morgan UBS Group Allianz The Vanguard Group
Understanding the Role of Investment Management Companies
Investment management firms work with a range of end-clients. These may be high wealth private investors or institutional investors, including corporations, charities, trusts, pension funds or government. In each case, the investment management firm’s role is the same – to understand the long-term financial objectives of a client, and make investment decisions that balance the appropriate amount of risk with appropriate return potential. Though each client – and subsequently each client portfolio – is unique, the main processes involved in investment management are fairly standard, made up of three core activities:
Analysis of goals – The investment management firm will seek to gain a keen understanding of what a client is looking to achieve. They’ll assess how much capital is available for investment, what the client considers a profitable return, the amount of risk they’re willing to take to achieve it and the time frame they have to do so. Exploration of investment opportunities – Once objectives are set, potential investments are explored. This responsibility usually falls to junior employees like investment analysts, who research, gather data on and present investment opportunities to their managers for consideration. From this, recommendations are then made to clients. Design and implementation of investment strategies – The firm will also look to protect a client’s investments through using goal-appropriate strategies, reducing risk by diversifying their portfolio and continually monitoring performance.
Clients benefit from the services of investment management companies in multiple ways. First, they get the expertise of seasoned professionals that understand the ins and outs of the investment world. These experts not only help identify and access profitable opportunities, but also uncover hidden risks. They also receive a certain level of protection in the event of a downturn, since an investment manager will make sure their portfolio holds no greater risk than necessary. Some firms also offer specialist services, like private equity, for example. Of course, investment management companies need to make money for themselves as well as their clients, which they do by charging management fees and/or taking a specified percentage of any investment profits.
What Do Investment Managers Do?
An investment manager’s role is essentially that of an investment management company – to evaluate a client’s objectives and make informed investments that bring about the best possible return. To do this, they undertake a series of day-to-day activities, including:
Liaising with prospective clients – An investment manager will act as the face of their employer, articulating the benefits of a professional service to potential investors and discussing their specific requirements. Liaising with existing clients – They’ll regularly update active investors on the performance of their portfolio, talk through varying strategies for growth and respond to any client queries. Meeting with their internal team – Most investment managers will have a team working below them, including investment analysts that they’ll meet with on a daily basis to discuss both general and client specific matters – for example, global events that may have an impact on managed portfolios or financial data gathered on a new investment opportunity. Assessing the economy and financial markets – Investment managers need to stay up to date with current news and events, so this forms an important part of their daily schedule. Research and data gathering – Though primarily the role of an analyst, investment managers will also spend time looking into the financial standing of various companies.
The services an investment manager provides may also extend to financial planning, though the role is not to be confused with that of a financial coach or advisor. Financial coaches, planners and advisors focus on the more basic areas of personal finance, such as how to plan for retirement or how to consolidate and reduce existing debt. Though they may help their clients free up investment capital, they are not responsible for making investment recommendations. It takes a lot of hard work and commitment to get there, but once you hit investment manager status, you’ll work autonomously, responsible for managing your own workload effectively. Financial reward will be down to the success of the portfolios you manage, so essentially, the more you put into your role, the more you’ll get out of it. According to Glassdoor, the financial reward for investment managers in the US is very healthy, with annual salaries ranging from $51,000 to $172,000.
How to Start a Career in Investment Management
It’s a competitive landscape in the investment world, and companies look to hire the most promising talent, able to deliver on behalf of their clients. With that in mind, the earlier you start building your skills and professional experience, the better. You’ll also need to be willing to commit, since this is a job where you’ll have to earn your stripes. You should be looking to achieve a 2:1 or above (or, roughly, at least a 3.3 GPA) in a finance or business-related degree, and undertake work placements as part of your education. Internships are a common path to entry. They not only give you hands-on experience in an investment setting, but many graduate employers use them as a way of identifying the next intake of entry level candidates. If you’re successful in obtaining an entry level role, you’ll start out as an investment analyst, typically spending three or four years supporting investment managers in their work.This is a role that comes with long working hours and a lot of grunt work, so you’ll need to be fully committed to your long-term goals if you’re going to take it on. If you opt to acquire an MBA after graduation, you may be eligible to jump straight in at senior analyst level, taking on more responsibility and specializing in a particular asset class, industry sector or geographic area. Your career development will progress from here, and your employer may require you to obtain professional certification, such as Chartered Financial Analyst (CFA) status or specific licensure, depending on where it operates. With demonstrable experience and success under your belt, you can then progress to investment manager level, taking on higher stakes portfolios as you develop.
What Skills Do I Need to Be an Investment Manager?
Successful investment managers demonstrate a combination of key technical abilities and soft skills. These include:
Interpersonal skills – You’ll be an excellent communicator, able to convey complex information clearly, build lasting relationships with clients and effectively manage a team of junior and senior analysts. Decision making – This is a core aspect of the role, so you’ll be confident in making high stakes decisions based on strong supporting evidence. Organization – Thanks to technology, a large proportion of an investment manager’s work is now automated, but you’ll still need to keep close track of everything under your care – if you don’t stay organized, you’ll likely drop the ball at some point. Financial acumen – You will, of course, have a natural aptitude for numerical interpretation and financial analysis, able to spot trends, risk and potential through the critical evaluation of raw data. IT skills – You’ll spend a lot of time working with productivity applications, Microsoft Excel in particular, so you will need to be proficient here. A calm manner – As mentioned, this can be a pretty pressurized working environment, and investment managers need to have the ability to keep a clear head in challenging circumstances, stay focused and not panic.
If there’s one thing you need more than anything else in this career, it’s self-motivation. Only those with the drive to succeed will make it to the top, so if you’re in two minds as to whether this is the career path for you, it’s probably not.
Final Thoughts
Investment management is one of the most financially lucrative careers around, and those who are willing to put in the time and effort when they first start out will have a wealth of opportunity in front of them. That said, it should not be entered into lightly, because for a good few years you’ll be making a lot of personal sacrifices in favour of professional gain. Do your research, and make sure you understand exactly what’s expected of you before you commit. If you’re still convinced this is the profession for you, start gaining experience as early as possible. Anything that can make you stand out from the crowd in this competitive field is a major bonus.
