Depending on the type of investment manager, he does one of several things. In some cases, an investment manager is in charge of overseeing a large sum of money collected from a variety of clients and allocating it to various investments. In other cases, the manager provides investment advice to individuals but does not collect or invest money.
In the first situation, the term investment manager is most commonly used. Hedge funds and mutual funds are both managed by investment managers. A large group of investors will pool their funds in either case. The money will then be invested in various stocks, bonds, and other investments by the manager.
On the stock exchange or stock market, you can buy a variety of mutual funds. The funds frequently have specific objectives or invest in specific stock types. A growth fund, for example, invests in stocks of companies that are poised for expansion and growth. In such cases, the investment manager chooses from a wide range of emerging markets or smaller companies with the potential to grow and expand.
Hedge funds, on the other hand, frequently invest money for a small number of clients. Hedge fund managers, like mutual fund managers, manage a pool of money from investors. Hedge fund managers also have specific objectives for the fund, which determine which stocks will be purchased.
A large brokerage firm is often where an investment manager works. For example, the Vanguard brokerage firm offers mutual funds based on stock indexes that investors can purchase. Those mutual funds are managed by investment managers with prior investing experience.
The performance of a fund is used to evaluate the managers. The managers may receive bonuses and be allowed to continue managing the fund if the fund provides a good return on investment or makes enough money for investors. A fund manager may be fired if the fund performs poorly.
The managers of many mutual funds and hedge funds bear a great deal of responsibility because they manage millions of dollars in investment capital. They must conduct adequate market research in order to choose stocks or bonds that are likely to perform well. To buy stocks on behalf of the fund’s investors, they usually need to be licensed brokers. The advantages of investing in such a fund are that it has more capital available for investment than an individual investor, allowing the investor to own a piece of a large portfolio of diversified investments and benefit from the overall performance of those investments.