what is investment management 
investment management refers to the handling of an investment portfolio or a grouping of assets it involves buying and selling assets developing short and long term investment strategies creating a tax strategy and managing asset allocation it can also include banking budgeting and other financial duties as well the term most often refers to managing the holdings in an investment portfolio and trading them to achieve a specific investment objective investment management is also known as money management portfolio management or wealth management understanding investment managementprofessional investment management aims to meet particular investment goals for the benefit of clients whose money they have the responsibility of overseeing these clients may be individual investors or institutional investors such as pension funds retirement plans governments educational institutions and insurance companies investment management services include asset allocation financial statement analysis stock selection monitoring of existing investments and portfolio strategy and implementation investment management may also include financial planning and advising services not only overseeing a client s portfolio but coordinating it with other assets and life goals professional managers deal with a variety of different securities and financial assets including bonds equities commodities and real estate the manager may also manage real assets such as precious metals commodities and artwork managers can help align investments to match retirement and estate planning as well as asset distribution according to an annual study by research and advisory firm willis towers watson the combined holdings of the 500 biggest investment managers was 113 7 trillion in assets under management at the end of 2022 latest information a decrease of 13 7 from the previous year 1in corporate finance investment management includes ensuring a company s tangible and intangible assets are maintained accounted for and well utilized running an investment management business involves many responsibilities the firm must hire professional managers to deal market settle and prepare reports for clients other duties include conducting internal audits and researching individual assets or asset classes and industrial sectors aside from hiring marketers and training managers who direct the flow of investments those who head investment management firms must ensure they move within legislative and regulatory constraints examine internal systems and controls account for cash flow and properly record transactions and fund valuations in general investment managers who have at least 25 million in assets under management aum or who provide advice to investment companies offering mutual funds are required to be registered investment advisors ria 2as a registered advisor they must register with the securities and exchange commission sec and state securities administrators it also means they accept the fiduciary duty to their clients as fiduciaries these advisors promise to act in their client s best interests or face criminal liability firms or advisors managing less than 25 million in assets typically register only in their states of operation investment managers are usually compensated via a management fee usually a percentage of the value of the portfolio held for a client also fees are typically on a sliding scale the more assets a client has the lower the fee they can negotiate the average management fee is between 1 to 2 3advantages and disadvantages of investment managementthough the investment management industry may provide lucrative returns there are also key problems that come with running such a firm the revenues of investment management firms are directly linked to the market s behavior this direct connection means that the company s profits depend on market valuations a major decline in asset prices can cause a decline in the firm s revenue especially if the price reduction is great compared to the ongoing and steady company costs of operation also clients may be impatient during hard times and bear markets and even above average fund performance may not be able to sustain a client s portfolio professional analysisfull time diligenceability to time or outperform marketability to protect portfolio in down timessizeable feesprofits fluctuate with marketchallenges from passively managed vehicles robo advisorssince the mid 2000s the industry has also faced challenges from two other sources the latter exemplifies passive management since few investment decisions have to be made by human fund managers the former challenge does not use human beings at all other than the programmer writing the algorithm as a result both can charge far lower fees than human fund managers can charge however according to some surveys these lower cost alternatives will often outperform actively managed funds either outright or in terms of overall return primarily due to them not having heavy fees dragging them down the pressure from this dual competition is why investment management firms must hire talented intelligent professionals though some clients look at the performance of individual investment managers others check out the overall performance of the firm one key sign of an investment management company s ability is not just how much money their clients make in good times but how little they lose in the bad investment management firmsthe top 20 investment management firms control 44 2 of global assets under management according to the willis towers watson report mentioned earlier 1the five leading asset management firms and the value of the assets they hold are the current state of the investment management industrythe investment management industry is facing challenges changing client expectations and evolving technologies that will continue to be huge factors throughout 2024 and beyond big data and ai will also continue to be drivers of innovation in investment management helping to increase the effectiveness of strategies like smart beta here are some of the key findings from deloitte s 2024 investment management outlook 4investment management processinvestment managers typically design a portfolio with the client s interests in mind this can include meeting with the clients to discuss their investment goals and risk tolerance based on the client s feedback the investment manager then buys the assets and securities to fill the client s portfolio from then on the manager will occasionally rebalance the portfolio as the market changes the frequency depends on their agreement with the client in some cases it may be assessed once a year once a quarter or even every month the more actively a portfolio is being managed the higher the management fees investment managers may also provide advice to their clients in other areas such as how to save for college or retirement 