Investment Management

Investment Management is the professional asset management of various securities (stocks, bonds, etc.) and other assets (e.g., real estate) in order to achieve specified investment goals for the benefit of investors. These investors may be individuals or institutions such as pension funds, corporations, charities, and educational establishments. Investment management services include asset allocation, financial statement analysis, stock selection, risk management, and portfolio strategy.


The practice of investment management can be traced back to at least the 19th century with the rise of various investment houses and trusts. The industry has seen significant growth and change, especially with the advent of modern portfolio theory in the 1950s and the subsequent development of electronic trading and financial markets.

Investment Strategies

  • Active Management: In active investment management, portfolio managers make specific investments with the goal of outperforming an investment benchmark index. Active managers rely on analytical research, forecasts, and judgment to make investment decisions.
  • Passive Management: Passive investment management aims to replicate the investment holdings of a particular index. The most common type of passive management is index tracking, where a fund's portfolio mirrors that of a specific index.
  • Hybrid Strategies: Some funds use a combination of both active and passive management strategies, known as hybrid or "smart beta" strategies.
  • Asset Allocation: Asset allocation involves dividing an investment portfolio across various asset classes like stocks, bonds, and cash equivalents to achieve a desired risk and return profile. The allocation is often adjusted based on factors like age, risk tolerance, and investment objectives.
  • Risk Management: Risk management in investment management involves identifying, assessing, and prioritizing risks followed by coordinated and economical application of resources to minimize, monitor, and control the probability of unfortunate events.

Types of Investment Funds

  • Mutual Funds: Mutual funds pool money from various investors to purchase a diversified portfolio of stocks, bonds, or other securities managed by professional managers.
  • Hedge Funds: Hedge funds are private investment funds that engage in various kinds of trading and investment activities. They are typically open only to a limited range of qualified investors.
  • Exchange-Traded Funds (ETFs): ETFs are investment funds that are traded on stock exchanges, similar to individual stocks. They typically aim to replicate a specific index but can also employ active strategies.
  • Investment Managers: Investment managers are professionals who manage investment portfolios, often for a fee. They may work for investment management firms or be self-employed.
  • Regulation and Compliance: Investment managers must comply with various regulations, including those set by the Securities and Exchange Commission (SEC) in the United States or similar bodies in other countries.

Related Disciplines

  • Financial Planning
  • Risk Management
  • Asset Management
  • Corporate Finance

See Also