Facts about funds
- Home »
- Investor centre »
- Facts about funds »
- How your money is managed
How your money is managed
|
The money invested in funds is managed by professional investment managers who are qualified and experienced. They make investment decisions (ie. how and where to invest the fund's money) based on the fund's stated investment objective and strategy. Each fund has a KIID (Key Investor Information Document) or Simplified Prospectus that describes the investment objective or strategy. |
Meeting fund objectives
Every fund has an investment objective. For example, to maximise capital growth from the shares of international companies, to generate income from global bonds, to track a certain index, or to achieve a steady return which is greater than zero. The investment manager aims to meet this pre-determined objective.
Using different strategies
They aim to meet the fund objective by employing one or more investment strategies. The process is often referred to as portfolio management. It involves taking calculated and carefully monitored investment risks for potential gain or income. The same principles apply whether they manage money in pension funds, insurance funds or in authorised investment funds for individual investors.
Broadly speaking, there are two main investment approaches. One is passive management where the stated objective of the fund is to replicate either substantially or completely those of a particular index or derivatives are used to have the same effect. Active management is where the objective of the fund is to out-perform the market or meet particular investment objectives. Investment decisions are taken on the basis of research on economies, currencies, interest rates, industry sectors etc. The strategies used are varied (eg. value investing) and success depends on the skill of the investment manager. In any strategy, there is no guarantee of a completely successful outcome.
Find out more about investment strategies
Comply with rules
The investment manager of a fund which is offered to the public in the UK has to follow clear rules regarding eligibility of investments. The rules determine, for example, in which assets the fund can invest, how much of a fund can be invested in one company, and to what extent derivatives can be used.
Find out what funds can invest in
Investment managers are qualified and trained
Investment managers are expected to attain high level qualifications and to train for a considerable period before becoming responsible for managing clients’ money. Many investment managers are Chartered Financial Analysts (CFAs), a qualification which is recognised worldwide and is equivalent to a Masters Degree. Others have a professional level qualification with the Chartered Institute for Securities and Investment.
Investment managers often start their career as analysts carrying out in-depth research to support investment managers’ decisions to buy, sell or hold specific investments in companies, assets, sectors or countries. Others specialise in quantitative analysis, such as setting up and running computer models to analyse financial data, to make forecasts and to manage risk.
Investment managers keep up with developments in companies and markets, so they can identify new investment opportunities.
For more information on a career in investment management, go to Directions FSSC.