This article aims to assist in the training of novice investors and students for financial services by examining the principles of truly effective investment fund management. The most important considerations are considered in terms of their role in ensuring that the management standard of an investment fund is able to meet its objectives.
Good fund management is fundamental to creating an investment portfolio sufficiently diversified to mitigate investment risk, as well as stable and opportunistic enough to maximize the return achieved.
There are many factors that influence whether an individual or company can successfully manage a fund and meet the stated goals. These include the following areas:
The ability to be able to use and understand all the elements of the modern quantitative analysis systems is essential for a successful fund manager. This facilitates informed and systematic investment, supported by extensive statistical analysis and historical data. The use of technological solutions is therefore crucial to ensure efficiency in the research processes.
Management Risk Management
Monitoring and identifying the existing and emerging risks associated with a particular investment activity is crucial so that deductions can effectively inform investment strategy. State-of-the-art risk management software, manual processes and individual expertise are all fundamental to ensure this is successfully implemented, and therefore those seeking a fund manager or those wishing to become fund managers must once again treat risk management as a key priority.
Consistency and transparency
When aiming to define realistic investment goals and objectives, a fund manager should demonstrate a degree of consistency in their investment activity. This is because it enables a valid picture of investment behavior in the mind of the investor and also enables the achievement, communication and evaluation of historical success.
As such, commitment to a high level of transparency of information for investors is also crucial to a successful fund manager. Keeping investors informed with accurate information, whether it is the original strategy or the results achieved, allows psychological barriers and potentially damaging legal problems to be overcome.
It is very important for a fund manager to demonstrate a detailed understanding of different investment landscapes from a variety of markets across the globe. The identification of global investment trends makes it possible to explore and exploit opportunities in other markets as well as to enable the Fund to avoid areas where there are threats to investment stability and profit.
This refers to the ability to implement an investment strategy that is able to persist through various market and economic conditions. Short-term gains in alternative investment areas can be understandably seductive for some fund managers, but pursuing them can lead away from the defined investment strategy and will often lead to unstable or devastating returns.
A stable fund management team is important for developing a team that has a deep and detailed understanding of the areas in which investments are made to expand expertise and increase fund success. A stable team is also a marketable commodity for new investors looking for proven expertise and track record that is essential to the ongoing health of the organization.
Environmental, Social and Governance Issues (ESG)
In recent years, we have seen society and lawmakers focus more on responsible investment. Which means that fund managers need a thorough understanding of existing and new ESG issues (environment, social governance).
the UN Principles for Responsible Investment (UNPRI) provides a framework to ensure that individuals and organizations can adhere to a Code of Practice for Ethical and Responsible Investment and should be investigated and clearly understood by investors and investment professionals.
There are many great considerations for beginner investors and hopefuls investment fund managers, factors that have a significant impact on investment success. However, if each of these factors is either in place or adhered to at all stages of the investment life cycle, it is much more likely that the management of a fund will be more efficient and profitable in the long run. As such, each factor should be considered important for future success by both novice investors and aspiring fund managers.