What is Fund Management?
The term “fund management” refers to the function of the fund managers who oversee and handle the financial assets of individuals or institutional investors.
The fund managers ensure that the investors’ goals are achieved through appropriate investment strategies, and to do that, they keep track of the investors’ assets/ investments and liabilities/ obligations. At times, funds management is also referred to as asset management.
Explanation
Fund management refers to the systematic process in which a fund manager operates, deploys, maintains, disposes, and cost-effectively upgrades assets. At the same time, they ensure optimum return on investment. As such, a fund manager must pay close attention to the return, cost, and risk associated with the available investment opportunities. Another crucial aspect of fund management is the maintenance of adequate liquidity of funds to meet any upcoming obligations.
Objectives of Fund Management
The primary objective of fund management is to manage investments on behalf of investors. Some of the other objectives are as follows:
- Ensure the highest level of safety and stability for the investors by focusing on investment opportunities that offer the right mix of risk and return.
- Guarantee capital appreciation of the investments in the long term.
- Besides long-term capital appreciation, generate regular cash flow through interest and dividend income on the investments.
How do Fund Managers Work?
The primary responsibilities of the fund manager include the selection of appropriate investment strategies for the investors and the management of their portfolios. It may comprise one manager, two persons as co-managers, or a team of three or more co-managers based on the size of the assets under management. A fund manager must monitor the market, ongoing economic trends, and available investment opportunities to make informed investment decisions. A fund manager always seeks to stay ahead of peers and beat the competition by picking the right securities and implementing the appropriate investment strategy.
Types of Fund Management
Based on investment types, fund management can be divided into the following 4 types:
- Mutual Fund: An open-ended fund pools investments from multiple investors to purchase securities.
- Pension Fund: This type of fund is built to generate income for investors after retirement.
- Trust Fund: A type of estate planning tool that maintains the investment assets under a trust managed by a neutral third party.
- Hedge Fund: This investment fund uses complex trading and risk management techniques to trade in relatively liquid assets.
Importance of Fund Management
Fund management is crucial because institutional and retail investors rely on them to achieve their investment goals. Fund management companies work round the clock to assess the financial position of the investment assets to help the investor’s financial objectives promptly. The financial objectives may be an education fund for children, a retirement fund, etc.
Fund Management Companies List
Please find below the list of the top 10 (by asset under management) global fund management companies.
| Fund Management Companies | Asset Under Management (AUM) | Background |
| BlackRock Inc. | $6.8 trillion | It is the largest fund management company globally. Founded in 1988, the company has pioneered exchange-traded funds (ETFs)through its iShares products. Currently, shares constitute more than 25% of BlackRock’s AUM. |
| Vanguard Group | $6.2 trillion | Founded in 1975, it is popular for its passive investment strategy, wherein it invests in funds that mimic the movement of some specific indexes or the broader market. Besides fund management, it offers brokerage services, annuities, and other financial planning services. |
| UBS Group | $3.3 trillion | It is a Switzerland-based investment firm that started its operation in 2002. Around 70% of its portfolio is tied up with the wealth management business, while the remaining 30% is in the asset management business. |
| State Street Global Advisors | $3.1 trillion | This Boston-based investment firm is a subsidiary of the State Street Corporation. It was founded in 1978 and manages investments for various institutional clients, including local governments, non-profit organizations, etc. |
| Fidelity Investments | $3.2 trillion | Founded in 1946, it has grown to become an asset manager and a discount broker catering to more than 27 million customers. It manages clients’ investment portfolios and offers an online platform to transact independently. |
| Allianz Global Advisors | $2.4 trillion | It is one of the investment divisions of the German insurer Allianz. It was founded in the year 1890. |
| JPMorgan Asset Management | $1.9 trillion | Founded in 1871, it is the asset management division of the larger investment bank group, J.P. Morgan Chase. In 2017, assets worth $1.3 billion were transferred from BlackRock as part of a new custody arrangement. |
| Bank of New York Mellon | $1.9 trillion | Founded in 1784, this investment firm has a long history of over two centuries. During this period, it has grown into a large global entity with operations across 35 countries. |
| Capital Group | $1.8 trillion | This Los Angeles-based investment firm was founded in the year 1931. It operates through its subsidiary, American Funds Distributors, and offers over 40 mutual funds. |
| PIMCO | $1.8 trillion | Founded in 1971, this California-based firm was acquired by the German insurer Allianz and currently operates as one of its investment divisions. It is an autonomous subsidiary of the group. |
Advantages of Fund Management
- It allows the investors to access a diversified portfolio that comprises investments in various sectors through different asset classes.
- It facilitates wealth creation over a period of time with the right mix of risk and return.
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