Finding the best investments on the market is a full-time job – it’s no surprise people pay investment management firms to do it for them. Here’s a quick look at how those firms operate and the careers available.
Keeping capital in safe hands
What is investment management?
Put simply, investment management firms invest their clients’ money. They choose the right selection of investments - from fast-growing, risky stocks to safe but slow-growing bonds. The aim is to achieve the return the client needs at a level of risk they’re comfortable with.
Investment management firms take on all the effort of creating an investment portfolio for their clients and open up new investment opportunities that wouldn’t otherwise be available.
Investment management firms work for all different types of client. Some focus on wealthy individual investors. Others work with companies, charities, trusts or major corporations.
The three key tasks of investment management
1. Assess clients’ financial goals and attitude to risk
Investment management firms need key information such as how much the client has to invest, how much return they want, when they’ll need to access their money, and how much they’re willing to risk losing.
2. Monitor potential investments
Investments range from cash deposits and government bonds to shares in new companies with unpredictable futures. An investment management company needs to be aware of the possibilities and calculate the investment risks and returns of each. That’s the job of an investment analyst.
3. Create investment strategies
Each client needs a portfolio of investments that match their goals. A diverse portfolio, with investments spread across many different assets, reduces risk – it’s a case of not putting all your eggs in one basket.
That’s the basic outline of an investment firm’s business. There are a huge number of ways to go about it. Firms might manage investment funds for multiple investors. They might invest in private equity. And there are other tasks for the firm, such as business development and marketing, IT, pricing and accounting.
How do investment management firms make money?
The more profit they make for their clients, the more money investment management firms make. They charge their clients a management fee and take a percentage of the profits from the investments.
Roles in the investment management industry
Roles at an investment management firm include:
- investment managers
- risk managers
Types of investment management firms
- Large investment management firms, such as BlackRock, manage assets running to trillions of dollars
- Boutique firms are smaller and sell themselves on their quality people and personal touch
- Specialists offer investment expertise in a particular area, such as private equity or investing in art. They may be employed by other investment management firms
- Investment banks such as Goldman Sachs tend to have large, well-developed asset management divisions
Why it might be for you
If you're looking for a career that uses your brain - then investment management has that in bucket loads. You'll need to put your analytical mind into action on a daily basis and what's more, you'll also be expected to apply the skills you're gaining in your degree into action.
Intellectually rigorous with exceptional training and generous starting salaries, investment management is a sought after career route by many a bright graduate.
Getting into investment management
As a graduate, you’ll start your career in investment management as an investment analyst. Over two to four years, you’ll gain more responsibility for devising, recommending and selecting investment strategies, until you reach a stage where you have full responsibility for managing an investment portfolio or investment fund.
Because it’s a popular industry, you should look to gain as much experience as possible while at university. Aim to get an internship in the summer before your final year.
If you’re looking for a more flexible career, you can strike out on your own. After gaining a few years of experience and some contacts in the industry, you could go freelance as an investment adviser or wealth manager.