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The Lanturn Blog

Carefully curated and thoughtfully written content for businesses of any size.

FUND MANAGEMENT

The Basics of Fund Management: Explained

December 2021

Andrew Macintosh

The media landscape is crowded with experts offering investment advice. But not everyone has the time or inclination to begin investing for themselves. This is where a licensed fund management company or an investment management firm comes into the picture. They are usually represented by a fund manager when facing clients.

 

Fund Management – What Do Fund Managers Do?

Typically, fund managers are the ones responsible for implementing the right investing strategy and management. They are tasked with overseeing the portfolio’s trading activities and direction, working with analysts to conduct comprehensive research to make the right investment decisions.  A good fund manager will surely ask about their client’s financial goals in the short or long term before deciding on the proper portfolio management or investing strategy. A young person in their mid 20’s will probably have a more aggressive risk profile, meaning that they’re willing to invest in more volatile assets such as stocks, given that they’re still young and can recover if they lose their initial investment.  This is in stark contrast to a couple in their mid 50’s who are looking forward to their retirement. They will likely have a conservative risk profile, meaning their ideal investment asset allocation or portfolio should consist of asset classes mostly with stable returns, such as government bonds or blue-chip equities.

 

Classifications of Fund Management

Fund management can be classified into three categories; client type, the method used for management, and the investment type. Each of which can be broken down further into different types. 

 

By Client

When it comes to clients, there are two types, either corporate or personal individual clients. Both may have high net worth, but often individual clients have a smaller net worth when compared to corporate clients.

 

By Method

Methods in managing funds can come in two ways, either active or passive management. Active management means your fund manager consistently keeps tabs on what is happening on the market; they buy or sell your assets to maximise profits, whereas passive income is the opposite. Your fund manager will likely keep it on an index fund, so you get exposure to all industries available in the market.

 

By Investment Type

Regarding investment type, it refers to the asset class or types you’re investing in, such as mutual funds or pension funds. These funds will likely consist of investments that are in line with the client’s risk profile that has been assessed by the fund manager, as explained above.  One other concept that is closely associated with fund management is hedge fund management. In layman’s terms, hedge funds are similar to regular investing, but the managers employ all sorts of complex instruments in an attempt to “hedge” one investment against the other. It is also riskier since managers will short stocks or other equities to obtain higher returns, but are also prone to bigger losses.  Ultimately, fund management in investing is a way for you to protect or increase the value of your money as inflation continues to grow each year. However, not all have the luxury to do their investing by themselves; that is where fund managers can help. Ultimately, they are committed to assisting you in your wealth management needs. Are you looking for fund management in Singapore or elsewhere? Look no further; start it with Lanturn

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