Global Investor Study

The role of investment managers explained in 90 seconds

This short video helps explain who investment managers are and what role investment managers play in your long-term financial planning.

09/12/2016

Investment managers, also known as fund managers and asset managers, seek to make their clients’ money grow so that they can achieve their goals and aspirations, to help offer a more comfortable future. 

They are the engine room of investment funds, pension funds and a range of other savings products.

This includes allowing investors who don’t have a lot of money to pool it with others and spread it more widely than they would be able to do on their own, in a cost efficient way.

This is often done through investment funds.  With the help of an investment manager, it is possible to invest in a wide range of different asset classes, such as shares, bonds, property, small start up firms and infrastructure.

Investment advisers or brokers can help investors make appropriate choices as to which assets or funds to invest in. 

Money is invested in line with the amount of risk clients are willing to take. (The more risk you take, the more reward you may reap, but there is also more possibility of losing money.  Generally the longer you are willing to invest the more risk you are likely to be able to take).

This is usually done by clients investing their money in a fund that most closely matches their attitude to risk and the asset classes that interest them.  Some clients want particular factors taken into account, such as environmental and social concerns. 

The fees are usually based on a percentage of the amount invested – that means the investment manager’s interests and those of the client are aligned – both benefit as the money grows.    

Investment managers comply with an extensive range of rules about how to behave and how to communicate with clients – they must always act in the clients’ best interests.

One of the main differences between an investment manager and a bank is that the money remains the clients’, and is held in safekeeping by a company which is independent of the investment manager.  If anything were to happen to the manager, the money remains safe and separate from that of the manager.  This should not be confused with investment risk, the possibility that investments within the portfolio may fall in value.

Investment managers scrutinise the companies and projects in which we invest on behalf of clients, and that investment helps those companies and projects finance jobs and growth. 

Investment managers will take a range of different factors into account in deciding where to invest, which will often depend on their particular investment style and what their clients are looking for.  Some may, for example, focus on investments which can be expected to generate income (e.g. in companies which are expected to pay dividends).  Others might focus on companies which they believe are undervalued and can be expected to increase in value over time. 

Once a decision to invest in the shares of a company is made, the investment manager engages with that company, holding them to account on behalf of their end investor, talking to them regularly about their strategy and voting at company meetings. 

It is best to maintain long-term relationships but there is the option of selling the shares when the investment in a company is not serving the interest of investors.