Investment management is the professional management of various securities (shares,

bonds and other securities) and assets (e.g., real estate) in order to meet specified
investment goals for the benefit of the investors. Investors may be institutions (insurance
companies, pension funds, corporations etc.) or private investors (both directly via
investment contracts and more commonly via collective investment schemes e.g. mutual
funds or exchange-traded funds).

The term asset management is often used to refer to the investment management
of collective investments, (not necessarily) while the more generic fund management may
refer to all forms of institutional investment as well as investment management for
private investors. Investment managers who specialize
inadvisory or discretionary management on behalf of (normally wealthy) private
investors may often refer to their services as wealth management or portfolio
management often within the context of so-called "private banking".

The provision of 'investment management services' includes elements of financial

statement analysis, asset selection, stock selection, plan implementation and ongoing
monitoring of investments. Investment management is a large and important global
industry in its own right responsible for caretaking of trillions of yuan, dollars, euro,
pounds and yen. Coming under the remit of financial services many of the world's largest
companies are at least in part investment managers and employ millions of staff and
create billions in revenue.

Fund manager (or investment adviser in the United States) refers to both a firm that
provides investment management services and an individual who directs fund
management decisions.
The professional management of assets, such as real estate, and securities, such as
equities, bond and other debt instruments, is calledinvestment management. Investment
management services are sought by investors, which could be companies, banks,
insurance firms or individuals, with the purpose of meeting stated financial goals.
The need for investment management arises due to:
 The existence of a large number of complex financial products

 Financial market volatility

 Changes in regulatory requirements

Investment Management: Who does it?

Every individual practices investment management to some degree, including budgeting,
saving, investing and spending. However, an investment manager is one who specializes
in placing money in diverse instruments in order to accomplish predetermined goals.
Investment managers are also widely known as fund managers. Investment managers
may specialize in advisory or discretionary management. When an investment manager
merely offers suggestions regarding where to invest money and when to sellsecurities, the
practice is known as advisory investment management. When an investment manager can
take action in managing portfolios without requiring client approval, it is called
"discretionary" investment management.
Investment management is often used synonymously with fund management. Moreover,
terms like asset management, wealth management and portfolio management are used,
with a thin line differentiating them. Asset management is often used for the management
of collective investments, which refers to investing money on behalf of a large group of
clients in a wide range ofinvestment options. An example of this is mutual funds.
Investment management that involves managing the investments of high net worth
individuals is often referred to as wealth management. Asset management
and wealth management are also called portfolio management.

Investment Management: What does it involve?

The process of investment management involves the following:

Setting investment objectives: Investment goals are different for individuals, financial
institutions, banks, insurance companies and pension and mutual funds. For instance, the
objective of a bank could be to achieve a minimum interest spread, while that for an
individual investor could be to increase return on investment.
Formulating the investment plan: After setting the objective, the investment plan is
formulated based on investor-related constraints, such as financial capacity and risk
profile, as well as environmental constraints, such as government regulations, market
conditions and the state of the economy.
Establishing the portfolio strategy: Based on the objectives and constraints, the ideal mix
of asset classes is identified. These asset classes could include equities, fixed income
securities, foreign securities, debt, real estate and/or currencies.

Selecting the assets: This involves selecting the individual options within the wide asset
classes.

Measuring and evaluating performance: Investment management is an ongoing process.

It is critical to consistently evaluate the performance of the portfolio and to improve it
continuously.
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Investment Management Vs. Investment Banking

Introduction
Do you enjoy following the financial markets, whether reading the Financial Times,
watching Bloomberg or checking stock prices on the internet? Do you want to earn good
money? If so, you may find a career in investment management appealing.

Investment management, also known as asset management, is pretty much what it sounds
like: a client gives money to an asset manager, who then invests it to meet the client’s
objectives. In other words, investment management seeks to grow capital and generate
income for individuals and institutional investors alike. The potential clients of an asset
manager can vary widely.

While there’s no black-and-white distinction between where retail and institutional

clients invest, asset managers who manage retail funds, for example, typically manage
money for retail clients, while asset managers at investment banks often invest money for
institutional investors like companies or municipalities (often for pools of money like
pension funds). Asset managers can also work for hedge funds, which combine outside
capital with capital contributed by the partners of the fund, and invest the money using
complex and sometimes risky techniques, with the goal of receiving extraordinary gains.
Asset managers buy their stocks, bonds, and other financial products from salespeople at
investment banks, who are on what is called the “sell-side.” (Asset managers are on the
“buy-side.”) Because they make commissions on every trade they facilitate, salespeople
provide information (research, ideas) to asset managers, in an effort to get the asset
managers to trade through them. (This is why some salespeople often used to shower
asset managers with perks like sports tickets and expensive dinners at fancy restaurants, a
practice that has diminished hugely in recent years.) Investment management basically
boils down to this: researching and analyzing potential investments and deciding where
exactly to allocate funds.

These days, many investment banks are looking to grow their investment management
businesses. Why? Because investment management is largely protected against the
volatility of the market. Asset managers charge clients a fee based on the amount of
money they are given, so they are guaranteed to make money as long as they attract
investment. (Asset managers are generally paid a percentage of the entire amount they
handle, whether they make or lose money for the client.) This guide will serve as an
insider’s guide for careers in the industry. It will provide you with the knowledge to
appropriately target your career search and a framework to handle the most challenging
interviews. It will also break down the many different career positions that are available
to both undergraduate and graduate students. c

History

The beginnings of a separate industry The process of managing money has been
around for some 200 years. At its outset, investment management was relationship-based.
Assignments to manage assets grew out of relationships that banks and insurance
companies already had with institutions – primarily companies or municipal
organisations with employee pension funds – that had funds to invest.

These asset managers were chosen in an unstructured way, with assignments growing out
of pre-existing relationships rather than through a formal request for proposal and bidding
process. The actual practice of investment management was also unstructured. Asset
managers might simply pick 50 stocks they thought were good investments as there was
nowhere near as much analysis on managing risk or organising a fund around a specific
category or style. Historically, managed assets were primarily pension funds. Traditional
and alternative asset classes such as retail funds, hedge funds and private equity had yet
to mature.

The rise of the retail fund Historians cite the closed-end investment companies
launched in the Netherlands by King William I during 1822 as the first retail funds, while
others point to a Dutch merchant named Adriaan van Ketwich whose investment trust
created in 1774 may have inspired the idea. The Boston Personal Property Trust, formed
in 1893, was the first closed-end fund in the U.S.

The first modern retail fund was created in 1924, when three Boston securities executives
pooled their money for investment, retail funds were normally used by financially
sophisticated investors who paid a lot of attention to their investments. They really came
to prominence in the early-to-mid 1980s when retail fund investment hit new highs and
investors reaped impressive returns. During this time investor sophistication increased
with the advent of modern portfolio theory and investment management firms began
heavily marketing retail funds as a safe and smart investment tool, pitching to individual
investors the virtues of diversification and other benefits of investing in retail funds.

Traditional versus alternative asset managers By the early 1970s, the investment
management industry had begun to mature as retail funds and other asset classes gained
prominence. The dominant theme over the past decade has been the proliferation of
alternative asset managers. It is necessary to make the distinction between traditional
asset managers and alternative asset managers. Traditional asset managers, such as retail
funds, are highly regulated entities that are governed by strict laws and regulations. The
Financial Services Authority (FSA) is the principal governing body, and its rules are
designed to protect investors and limit unnecessary risk-taking. Traditional asset
managers have defined investment mandates that determine what types of securities and
strategies they can pursue in a given portfolio. These strategies are discussed in detail in
further chapters.

Alternative asset managers include assets classes such as hedge funds, private equity,
venture capital and property. They are lightly regulated investment vehicles that do not
always have defined investment strategies or risk tolerances. These asset classes are
designed to be uncorrelated with the broad stock and bond markets and seek to provide
“alpha” returns in a variety of economic situations.

Hedge funds, for example, have evolved into high-risk money managers that borrow
money to invest in a multitude of stocks, bonds and derivatives. They use a large equity
base to borrow more capital and therefore multiply returns through leveraging. Since
alternative investments can be very risky, as well as lucrative, investors need to be
deemed “accredited” – which is determined by net worth – in order to invest. Six figures
is a minimum bank balance for any prospective investor.

The Industry Today

What’s really going on The industry controls around $64 trillion globally (having grown
by roughly 10 per cent annually over the past decade) and charges clients 1.5 per cent to
2 per cent for the privilege. Hedge funds charge 2 per cent management fees and typically
20 per cent performance fees.

No surprise then that operating margins in the investment management industry are more
than 40 per cent, according to the Boston Consulting Group. The beauty of the industry,
for its incumbents, is that as markets tend to rise over the long run their fees increase
even though the cost of managing money doesn’t. Overtime, according to some
estimates, fund managers raise their fees by double digits, up to around 15 percent a year.

The investment management industry is one of the few that broadly impact households
all over the world, particularly now. As the population gets older in the core European
Union countries, the old-age dependency rate is set to rise from 21 percent now to 50
percent in 2050 – and pension deficits have increased, more people than ever are
planning for their future financial needs. As a result, the industry is increasingly visible.
Investment management has become an increasingly important part of the financial
services industry in Europe. London, for example, is now one of the leading international
centres for investment management.

Still growing In Europe assets under management grew by almost €400 billion in 2007:
the UK alone now accounts for around 7 percent of global assets under management, the
third biggest home for managed assets behind the US and Japan. Retail fund demand has
continued to increase; nearly 50 million households had $24 trillion invested in retail
funds as of June 2007, up from $1 trillion in 1990. Despite the credit crunch investment
in alternative asset classes has also shot up. A survey by HedgeFund Intelligence said
global hedge fund assets under management reached $2.65 trillion at the beginning of
2008, a massive increase of 27 percent from the same period in 2007.

But the credit crunch will bite However, the adverse economic conditions of recent
times have caused problems for the industry. The credit crunch will lower returns in the
short-term because there will be less leverage available to fund managers, not to mention
the effect of the crunch on global stock markets. Many big investment banks, such as
Citigroup and Merrill Lynch, were already selling off their wealth management
departments before the economic downturn. As the credit crunch continues to bite and
push returns lower, more big players could downsize their investment management
offerings.

The crunch may also bring about regulatory changes. In the US, for example, the Federal
Reserve bailed out Bear Stearns because, if it failed, its entangled assets would have also
brought down the edifice of modern finance. As a result harsher regulatory regimes will
be introduced to ensure fund managers cannot topple a financial system that it has taken
centuries to create.

The heat has also been turned up on fund managers who are making exorbitant sums
amid a seriously tightening economy. While more people than ever are using food stamps
in the US some asset managers, particularly hedge fund owners, are making massive
profits.
Even multi-multi millionaires such as Bill Gates and John McCain have criticised the
super-rich for cashing in on other people’s hard-times. John Paulson, a hedge fund
manager, made $3.7 billion in 2007 primarily through shorting the risky CDOs that have
brought misery to so many. Paulson beat the best-known fund manager, George Soros,
into second place with an annual income of $2.9 billion. In the UK alternative assets
managers, particularly short-selling hedge funds, have been seriously admonished by the
FSA for spreading liquidity scare-stories about UK banks.

Pension reform and emergence of property Throughout Western Europe, pension

reform has become a politically explosive topic — and one being watched closely by the
biggest banks in London, Frankfurt and across the Atlantic on Wall Street. Several
European Union countries are facing pension crises, mainly due to an ageing population.
Europe’s state pension schemes are based on a pay-as-you-go premise, which means that
money paid into the retirement plan by today’s workers are passed through immediately
to today’s retirees. That means much more responsibility is placed on the current crop of
workers to pay for a disproportionate amount of pensioners: Older workers (aged 55 to
64) in the European Union are set to increase by 24 million between 2005 and 2030.

And here’s how investment managers might benefit in the years to come: the
governments’ plan is to strike a new model that shifts more responsibility to workers and
away from state-run pension plans. Nation’s like France, Germany and Italy are trying to
increase the retirement age as a way to encourage workers to look after their own
pensions through defined contributions. Meanwhile, requirements for defined benefit
contributions are being increased. As pension reforms are passed throughout Europe,
those that enter the investment management industry will benefit. It is one of the reasons
why investment managers, from Deutsche Bank in Germany to UBS in Switzerland, are
touting a variety of investment tailored to younger investors.

The show will go on Investors will always desire yields, whether from short-term risky
ventures or more secure longer-term investments. As a result, the industry can survive
anything. After all, assets are always there to be managed. However, the next couple of
years will be a tougher time for the industry as the risks surrounding financial markets
and global economic growth remain on the downside. As a result investors, alongside
other consumers, are tightening their belts to offset a drastically slowing global economy
and a reduction in cheap credit: while this continues investors’ appetite for equity
exposure and interest rate risk is likely to remain subdued. This will impact liquidity,
meaning managers’ will have less cash in their funds than they have been used to over the
last few years.

Consolidating There have already been well over 150 mergers in the investment
management industry in the last 20 years. Recent consolidation activity includes the
merger of BlackRock and Merrill Lynch Investment Management, buyouts of Jupiter
from Commerzbank and of Gartmore from Nationwide Mutual.

A further spate of consolidation is in the offing amid tough economic conditions. Experts
believe institutions with low price-to-earnings ratios, or struggling with poor asset
quality, will sell-off their investment management businesses to find more capital. The
credit market turmoil has already sidelined some private equity deals and could lead to
fire sales of distressed assets.

Indeed, M&A activity within the investment management industry was at an all time high
from January to March 2008 in terms of deal volume. In the first quarter of 2008 53 deals
were announced at a cost of around $9.6 billion. The acquired assets under management
totalled over $704 billion. By contrast in the same period of 2007 45 deals were
announced representing $544.9 billion in acquired assets under management.

Convergence The European investment management sector is currently experiencing

massive convergence between traditional and alternative investment styles. Hedge funds,
private equity funds and traditional asset managers are competing increasingly closely as
the lines between the asset classes become blurred. Investors increasingly understand
how to invest and which investments could generate higher returns in a regulated
environment. Regulators have realised this and are now offering traditional asset
managers new flexibility as long as investors remain protected.

The search for the alpha has aided the process. Traditional asset managers have been
buying hedge fund boutiques for some time. But now the difference between these
businesses and their core investment strategies are disappearing. Long-only managers are
also using regulatory devices such as UCITS III to offer hedge fund products for retail
investors and other products to widen the choice for their institutional investors.

Meanwhile, alternative asset managers are reaching a wider audience among investors
through regulated fund vehicles and eschewing offshore domiciles of the Caribbean and
the British Isles for EU member states such as Luxembourg. The Alternative Investment
Management Association (AIMA), the international hedge fund industry body, recently
suggested “Hedge funds are now considered part of the mainstream of the investment
management industry”.

There is even convergence among alternative assets. Private equity houses and hedge
funds are frequently adopting similar investment strategies. Cheap credit, low volatility
and rising equity markets encouraged hedge funds to enter the private equity market until
the middle of last year.

More strategically, hedge funds are increasingly ring-fencing capital for illiquid
investments, similar to those made by private equity. Recently they have deployed these
investments up and down the capital structure, including second lien and mezzanine debt
products. Private equity houses have acquired undervalued assets and businesses through
public market deals. Many experts suggest this could lead to further growth in “hybrid”
alternative investment firms. We will expand upon this in more detail in Chapter 2.

The shift from equities to bonds to equities After the dotcom bubble burst at the turn of
the millennium, equity markets became erratic as stocks were challenged by a mixture of
corporate scandals and weak economic growth. As a result funds moved from equities to
bonds. According to some estimates, pension funds moved £40 billion from equities to
bonds in 2004. However, strong economic growth and weakening bond yields since then
has instigated a shift back to equities.
But, experts suggest, investors in stocks lulled by periods of low volatility can be hit
hard. As the recent economic crisis has shown, things can change quickly and even the
strongest of stocks can plummet. In the UK during the 1970s – the last time stagflation
hit and editor of The Sun Larry Lamb immortalised 1979 as the ‘Winter of Discontent’ –
equities on the whole performed very poorly. Then, as now, investors flocked to more
secure bond funds, primarily investing in government debt as opposed to risky junk
bonds.

Still, bonds aren’t always a safe-haven in times of strife. The trick for investors, says one
fund manager, is to “Keep a diversified portfolio comprised of stocks and bonds. Even
100 percent safe products aren’t always safe, as most managers will tell you. The trick is
to spread the risk.

The challenge of exchange traded funds Described as the “Wal-mart” of the business,
exchange traded funds (ETF) are increasingly undermining the traditional business model
of investment management funds. According to Morgan Stanley, ETFs had $74 billion in
assets under management in 2000, but by 2007 this was up to $700 billion. The growth
will not stop there, with Morgan Stanley estimating that $2 trillion will be invested in
ETFs by 2011. And it is no surprise. Nearly anything investors believe will perform well
in the future can be bought in the form of an ETF, which is a portfolio that can be bought
on the stock exchange and costs much less than a traditional investment management
firm. The more investors pay in charges, the less money they are likely to make
according to experts. As a result, ETFs will remain extremely attractive to investors.

More than just investment More than ever investment management companies are
focusing on more than just investing. Business decisions such as marketing and
distribution, global growth, and technology integration are becoming increasingly
important factors in the success of investment management firms. While this Guide will
focus mainly on developing a career on the investment side of the investment
management industry, we will also spend some time discussing the growing alternative
career opportunities relating to these “non-investment” business issues.

Investment banking
An investment bank is a financial institution that assists corporations and governments in raising
capital by underwriting and acting as the agent in the issuance of securities. An investment bank
also assists companies involved in mergers and acquisitions, derivatives, etc. Further it provides
ancillary services such as market making and the trading of derivatives, fixed
income instruments, foreign exchange, commodity, and equity securities.

Unlike commercial banks and retail banks, investment banks do not take deposits.

To provide investment banking services in the United States an advisor must be a

licensed broker-dealer. The advisor is subject to Securities & Exchange Commission (SEC)
(FINRA) regulation.[1] Until 1999, the United States maintained a separation between investment
banking and commercial banks. Other industrialized countries, including G8 countries, have not
maintained this separation historically. Trading securities for cash or for other securities (i.e.,
facilitating transactions, market-making), or the promotion of securities (i.e., underwriting,
research, etc.) was referred to as the "sell side".

Dealing with the pension funds, mutual funds, hedge funds, and the investing public who
consume the products and services of the sell-side in order to maximize their return on
investment constitutes the "buy side". Many firms have buy and sell side components.

nvestment banking is a field of banking that aids companies in acquiring funds. In addition to the
acquisition of new funds, investment banking also offers advice for a wide range of transactions a
company might engage in.

Traditionally, banks either engaged in commercial banking or investment banking. In commercial

banking, the institution collects deposits from clients and gives direct loansto businesses and
individuals. In the United States, it was illegal for a bank to have both commercial and investment
banking until 1999, when the Gramm-Leach-Bliley Actlegalized it.

Through investment banking, an institution generates funds in two different ways. They may draw
on public funds through the capital market by selling stock in their company, and they may also
seek out venture capital or private equity in exchange for a stake in their company.

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An investment banking firm also does a large amount of consulting. Investment bankers give
companies advice on mergers and acquisitions, for example. They also track the market in order
to give advice on when to make public offerings and how best to manage the business' public
assets. Some of the consultative activities investment banking firms engage in overlap with those
of a private brokerage, as they will often give buy-and-sell advice to the companies they
represent.

The line between investment banking and other forms of banking has blurred in recent years,
as deregulation allows banking institutions to take on more and more sectors. With the advent of
mega-banks which operate at a number of levels, many of the services often associated with
investment banking are being made available to clients who would otherwise be too small to
make their business profitable.

nvestment banking is a particular form of banking which finances capital

requirements of an enterprises. Investment banking assists as it performs IPOs,
private placement and bond offerings, acts as broker and carries through
mergers and acquisitions.

Functions of Investment Banking:

Investment banks have multilateral functions to perform. Some of the most

important functions of investment bankingcan be jot down as follows:
Investment banking help public and private corporations in issuing securities in
the primary market, guarantee by standby underwriting or best efforts selling
and foreign exchange management . Other services include acting as
intermediaries in trading for clients.
 Investment banking provides financial advice to investors and serves them by
assisting in purchasing securities, managing financial assets
and trading securities.
 Investment banking differ from commercial banking in the sense that they
don't accept deposits and grant retail loans. However the dividing line between
the two fraternal twins have become flimsy with loans andsecurities becoming
almost substitutable ways of raising funds.
 Small firms providing services of investment banking are called boutiques.
These mainly specialize in bond trading, advising for mergers and acquisitions,
providing technical analysis or program trading.

Find out more about Investment Banking.

Online investment bank provides a large numbers of options to allocate their

shares through an online process. Get detailed on investment banks over the
world.

Fremont Investment Bank has been rendering a wide range of services since
1937. Get the online investment options by Fremont Investment Bank.

American Investment Bank raises money for companies using methods such as
IPO, private placement, offering bonds etc. Find more on American Investment
Bank.