FUND MANAGEMENT
WHAT IS FUND MANAGEMENT?
Fund Management refers to the function and operations of the fund managers who supervise and handle the financial assets of investors. The fund managers ensure that the investor’s goals are accomplished through appropriate investment strategies & plans and in the course of doing so, they keep track of both investments and obligations of the investors. Usually, the term ‘Asset management is also used in place of fund management.
It refers to the systematic procedure in which a manager maintains, deploys, operated, and upgrade assets in a cost-effective manner while they ensure optimum return on investment. Usually, a manager has to pay detailed attention to the return along with the associated cost and risk with the available opportunities. Another significant aspect of fund management is the maintenance of apt liquidity of funds to meet upcoming obligations.
OBJECTIVES OF FUND MANAGEMENT
The primary objective of fund management is to manage and operate investments on the investor’s behalf. Apart from this, some other objectives are:
- Work on generating long-term capital appreciation of the investments.
- Ensure the highest level of stability and safety for the investors by focusing on opportunities that offer the right blend of risk and return.
- Generate cash flow through returns and dividend income on the investments made.
WORKING OF FUND MANAGERS
Most fund managers follow a disciplined investment system in place that eliminates the emotion from investing. If investors bought a share and in case the share price increases, they may not be willing to sell as they believe that they can always select winners. If they sell at a loss, it is going to be a defeat.
A fund manager posses an emotional free process and thinking ability. They set out reasons to buy or sell shares. If the prices go down, they will want to see the reason behind it, and if they still believe in the entity, they will generally see the decrease in price as an opportunity to purchase more units at a lower cost.
SIGNIFICANCE OF FUND MANAGEMENT
1. Asset Allocation:
Fund Management assures proper asset allocation to match the long-term as well as short-term goals of the investors. It is closely related to diversification. While diversification aims at reducing the risks involved in investments, asset allocation aims at maximizing the reuters from the benefits.
2. Diversification:
It is a key area of managing funds, It is the procedure of allocating money across asset classes to reduce the overall portfolio risks while maintaining the desired potential return. Based on investor expectations, there is a distribution of funds in securities and assets that match the risk tolerance of investors.
3. Performance Tracking:
Fund management makes sure that the fund performance is being tracked which ensures that the investment strategies are adjusted to achieve the goals of investors and the fund as a whole. They use various techniques and metrics to carefully analyze fund performance.
4. Strategy Based Investing:
There are various styles of fund management that these professionals follow and adopt while making investment-related decisions. For example, a manager may opt top-down investing where they look for the best investments based on how bad or good the economy is performing. This strategy-based investing makes sure that the fund remains true to its goals for investors.
OPTING FOR A RELIABLE FUND MANAGER
Fund management is a complex procedure that involves a lot of research and financial knowledge. This is the reason why investors should opt for a reliable and experienced fund manager while selecting a mutual fund. Some factors to have a look into are as follows:
- Rankings by credible bodies.
- Industry experience
- Past performance of the funds actively managed by them.
Investors should perform a thorough check and do the needful research on the fund managers and check the track record before opting for a mutual fund. They should also make sure that they are very clear on the T&C’s of the investments and the risk involved with the same.