Investment management is a branch of financial management that deals with the allocation of capital resources, including corporate funds and retained earnings, among other things, to meet the different financial objectives of the firm. The term ‘investment management’ can also be used in the more narrow sense, which is just the management of the investment portfolio, usually by an individual or an organization. Investment management is a growing field with a number of sub branches, including Investment banking, venture capital, wealth management, and investment management consulting. These branches are designed to deal with specific investment issues such as asset allocation, inflation, risk management, and other related areas. Different countries have their own special policies in dealing with investment issues, but in general, investment managers are required to have a strong knowledge of financial markets, macroeconomics, and business practices as well as a good understanding of the social problems that need to be addressed.
As per the definition, ‘investment management includes the preparation and the management of financial assets, including debt and equity securities, long-term deposits, commercial and residential property, and private and public equities in businesses.’ The scope of such a management also encompasses investment research and evaluation, the prevention of financial losses, assurance of safe returns, and hedging against possible losses and risks. In fact, there are many more areas and aspects covered under the discipline of investment management, such as investment banking, asset allocation, global economics, information technology, real estate and derivatives, and investment strategies. Investment management also involves taxation, which is typically related to the profits and losses made by an organization’s investments.
One of the major roles played by an investment manager is to ensure that the total value of the assets held is equal to, or exceeds, the total amount of the liabilities held by it. This, in turn, ensures both financial security and financial attractiveness for the organization. If the owner of a firm has an inconsistent cash flow, the manager may opt to liquidate all or some of the holdings to reduce the company’s liabilities. On the other hand, if the manager believes that the value of the holdings should exceed the liabilities, he may decide to raise the share price and increase the company’s marketability. It is worth noting that the term ‘asset management’ is often used interchangeably with ‘money management’ or ‘savings’ management’.