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What does the investment management industry constitute? The world of finance can be complicated. To simplify for the sake of understanding, let us consider the financial world as broadly constituting of banks \u2013 (retail, commercial, and investment), insurance companies, and investment managers. Banking:\u00a0Retail and commercial banks are the ones most people…","_links":{"self":[{"href":"https:\/\/imarticus.org\/blog\/wp-json\/wp\/v2\/posts\/37018","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/imarticus.org\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/imarticus.org\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/imarticus.org\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/imarticus.org\/blog\/wp-json\/wp\/v2\/comments?post=37018"}],"version-history":[{"count":0,"href":"https:\/\/imarticus.org\/blog\/wp-json\/wp\/v2\/posts\/37018\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/imarticus.org\/blog\/wp-json\/wp\/v2\/media\/244743"}],"wp:attachment":[{"href":"https:\/\/imarticus.org\/blog\/wp-json\/wp\/v2\/media?parent=37018"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/imarticus.org\/blog\/wp-json\/wp\/v2\/categories?post=37018"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/imarticus.org\/blog\/wp-json\/wp\/v2\/tags?post=37018"},{"taxonomy":"pages","embeddable":true,"href":"https:\/\/imarticus.org\/blog\/wp-json\/wp\/v2\/pages?post=37018"},{"taxonomy":"coe","embeddable":true,"href":"https:\/\/imarticus.org\/blog\/wp-json\/wp\/v2\/coe?post=37018"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}

{"id":37018,"date":"2016-09-19T12:38:55","date_gmt":"2016-09-19T12:38:55","guid":{"rendered":"https:\/\/staging-imarticus.kinsta.cloud\/?p=37018"},"modified":"2022-10-12T10:20:49","modified_gmt":"2022-10-12T10:20:49","slug":"introduction-to-investment-management","status":"publish","type":"post","link":"https:\/\/imarticus.org\/blog\/introduction-to-investment-management\/","title":{"rendered":"Introduction to Investment Management"},"content":{"rendered":"

What is Investment Management? What does the investment management industry constitute?<\/strong><\/p>\n

The world of finance can be complicated. To simplify for the sake of understanding, let us consider the financial world as broadly constituting of banks \u2013 (retail, commercial, and investment), insurance companies, and investment managers.<\/p>\n

Banking<\/strong>:\u00a0Retail and commercial banks are the ones most people are familiar with and are mostly straightforward. They take in money through deposits from customers, other banks, and shareholders. They then distribute this money through credit cards and loans to individuals, companies, and other banks.<\/p>\n

Retail and commercial banks make money on the interest charged on these loans. Investment banks on the other hand are more complicated. They allow their clients, which include investment managers, to trade on the financial markets. They also deal with IPO, mergers, and acquisitions.<\/p>\n

Insurance<\/strong>: Insurance companies take in money by charging for private and corporate insurance policies, in return for against the unexpected. They in turn are protected from being unable to payout on policy claims by moving money to a reinsurance company and therefore reducing exposure.<\/p>\n

Investment Management<\/strong>: Investment managers also known as fund or asset managers do as the name suggests \u2013 they manage investments of private investors, corporates, banks, or insurance companies. Investment managers make their clients\u2019 money grow by using investment banks to buy and sell investments.<\/p>\n

Let us consider the funds managed by an investment manager as raw material whether in shares, bonds, commodities, or derivatives, and an investment manager as a machine that converts this raw material into a product by using a series of processes. The product is a fund. The goal of the fund is to make money for the investors. Thus, an investment manager<\/a><\/strong> uses an investor\u2019s money to make money.<\/p>\n

These processes vary greatly and depend on the investment strategy used. E.g.: passive vs. active investment. However, the principle remains the same. The fund aims to make a return by balancing risk and rewards and thus, in a process-driven manner ensures effective mobilization\/channeling of its resource i.e. money from investors.<\/p>\n

Thus, the players in the investment management industry can be classified into just two broad categories \u2013 the investment managers and the investors. Investment occurs directly i.e. investment contracts or more commonly via\u00a0collective investment schemes. A mutual fund is a type of collective investment scheme. They provide an efficient way of pooling funds for investment purposes.<\/p>\n

The Flow of funds in the asset management industry:<\/strong><\/p>\n

*PMS \u2013 Portfolio Management Services, AMC \u2013 Asset Management Services, WM \u2013 Wealth Managers.<\/p>\n

What is the Investment Process? What role does the investment manager play? What is the role of portfolio performance measurement in the investment process?
\n<\/strong>
\nLike any process, the investment process can be broadly classified based on four phases \u2013 Plan, Do, Check and Act. Similarly, it is pertinent to note that the investment management process, forming a part of the investment process cannot be improved without performance measurement. The following is an overview of the Investment Process.<\/p>\n

From the above, it is clear that for the investment process to be complete it needs to be measured. This measuring of the portfolio performance should preferably be a part of the\u00a0investment management process<\/a>\u00a0itself. In this case, it will contribute to improving the portfolio management process internally and thus contribute to process improvement. On the other hand, performance measurement can be undertaken by the investor as a part of the larger investment process. In this case, the same measures behave as a stricter audit function rather than a must-suited process improvement role.<\/p>\n","protected":false},"excerpt":{"rendered":"