Investment Management

Investment Management

Investment Management is the process of managing a specific portfolio of investments for clients. Investment Management is a broad area and requires advice from professional experts. Hence it is essential to recruit an investment manager to manage portfolio of investments. An investment manager is also known as an asset manager or an asset management company. Investment management companies assist in diversifying investments of clients.

Package Inclusions
  • Advice on investment management services.
  • Investment management advisory services.
  • Procedure on Starting an Investment Management Advisory company.
  • Regulatory compliance for starting an investment management firm.
  • Private Portfolio Management and Commercial Portfolio Management Services.
Investment Management

What is Investment Management?

Investment Management is managing the assets of another entity or individual. The company that manages investment is called an investment manager. Investment management companies can be divided into private investment management and commercial investment management. Investment management companies assist clients in making crucial decisions regarding investment.  Investment management would include managing securities such as stocks, debentures, and cash of clients.

Apart from this, investment advisory would also include the management of the real estate. Few investment advisory firms would handle traditional investments such as gems, gold andartifacts.However, nowadays, investment management firms would only manage a portfolio of securities and real estate.

Overview of the Investment Management Industry

Global Asset Management and investment management advisory has reached USD 93 trillion in 2018. This figure has reached more than USD 100 trillion in 2019. The above figure has reduced globally due to the current Covid-19 situation. However, research suggests that the situation will improve in the coming years as investors in the private and commercial space require investment planning and strategies to survive in the market.

In India, investment management has reached more than 20 trillion in the financial year 2018-19. Due to the current situation, the industry is going through various amendments. Asset and investment managers have to ensure that they stay ahead with changing times. In the next few years, this industry is supposed to increase by 40 lakh crores.

Types of Investment Management

Types of Investment Management

Private Investment Management-

Private Investment management is a field of investment management where individuals, NRIs, and HNIs are investors. HNIs are considered high net worth individuals who have different sources of investment. UNHIs are considered as ultra-high net worth individuals. Investment management firms dealing with private investment management have to adopt a client-friendly approach. Developing these relationships with clients would help the firm provide personalized services and support.

Commercial Investment Management-

Commercial investment management is different from private investment management. Under commercial investment management, the clients are primarily institutional investors. This would include mutual fund companies, educational institutions, insurance companies, pension fund companies, government agencies, and retirement homes. These investors would have different forms of investments. Moreover, they would have different individuals under them having a portfolio of investments. Therefore commercial investment management involves more amount of risk.

What does Investment Management Include?

Investment Management will include the following:

What does Investment Management Include

Allocation of Assets-

Investment Managers, must consider which assets are meant to be allocated first. The following factors would be considered :

  • Types of Assets in the Portfolio- Whether they are equity-based or debt-based assets.
  • Market Evaluation- This would include the assets' performance based on the portfolio and the general trends in the market. Sometimes, specific securities would change according to the changing market forecasts.
  • Portfolio Research- This will include dividing the portfolio based on the type of securities. Securities would be classified based on the form of security and the category of security.

Analysis of Financial Statements-

Investment Managers would also be involved in analyzing the financial statements of individuals. Apart from managing portfolios, an investment manager would also have to analyze the company's financial statements. By measuring the values of financial statements, investment managers can predict the investment amount present in the portfolio.

Based on the amount of investment present in the portfolio, the investment manager can categorize investments based on priority. Important portfolios will be classified first and given more priority. Portfolios that are not important would be given lesser priority and divided as per the requirement.

Selection of Stocks-

The selection of stocks is an essential element of portfolio management. Stocks selected in the portfolio management scheme would be divided according to the requirements and priority. A stock or portfolio yielding higher return on investment would be classified as a higher return rate. Stocks can be of different kinds. The following stocks are considered: equity stocks, debt stocks, shares, securities, and bonds.

Monitoring Investments-

Asset managers must research the market and consider possible downfalls in the market. Based on the research conducted by portfolio managers, the investments would be monitored regularly. Monitoring investments is required for proper investment management. On the performance of a particular investment, the portfolio manager must provide periodic reports to clients. Through the reports, clients would be able to understand if their portfolio is performing well or not.

The Strategy of Portfolio Implementation-

An investment manager must inform the client on the strategy followed for the implementation of the portfolio. This is a crucial aspect of proper portfolio management. Without keeping the client informed about the investment management strategy, the client would have no idea on what to expect from the management exercise. Portfolio Managers have to maintain specific standards, especially on the code of conduct followed by portfolio managers in India. This code of conduct has to be according to international standards and domestic standards.

Financial Advisory Services-

Portfolio Managers/ Investment Managers carry out financial advisory services apart from the other categories of activities. This would be advice on a particular investment and whether the investment would be beneficial to an investor. However, the investment managers should ensure that compliance is maintained with the relevant law for providing financial advisory services. For instance, a portfolio manager or investment manager in India has to act under the Securities And Exchange Board Of India (Portfolio Managers) Regulations, 2019.

Objectives of Investment Management Services

Investment Management/ investment management advisory services are carried out for the following:

  • Clients would receive professional advice from an investment manager to handle a portfolio of different forms of investments.
  • Investment managers have the skill to perform all the activities of investment management.
  • Investments Managers would conduct surveys and market research on the performance of the portfolio in the market. Based on this, investment managers would determine the probability of the portfolio performing well in the market.
  • Expert advice is required for investment management services.
  • A client with a varying portfolio would not have the burden to find lucrative ways to invest.

Regulatory Authority for Investment Management

  • The primary regulatory authority for India's investment management is the Securities and Exchange Board of India  (SEBI).
  • Portfolio Managers/ Investment Funds have to be compliant with the relevant regulations of portfolio management.
  • Portfolio Managers have to be compliant with the Securities And Exchange Board Of India (Portfolio Managers) Regulations, 2019.
  • Apart from the SEBI, the regulatory authority for an Asset Management Company is the Association of Mutual Funds of India (AMFI).
  • The SEBI (Mutual Funds) Regulations, 1996, also govern mutual funds/portfolio management in India.

Eligibility Criteria for Investment Management/ Portfolio Management

  • The applicant must have two directors or managers who have more than five years of experience of investment managers/ portfolio managers.
  • The investment management firm has to have a net worth of 2 Crore.
  • The period of certificate of registration for an investment manager is three years.
  • There must not be any form of disqualification or suits against any managers of the firm. This would also apply to directors of the portfolio management firm.
  • The following professionals can work as portfolio managers- Chartered Accountants,  Company Secretaries, Lawyers, Investment Bankers.
  • The applicant carrying out investment management advisory services must have sufficient office space.
  • The sponsor must have an excellent record when it comes to integrity and investment.
  • The applicant has satisfied the criteria of being a proper and fit person as per the requirements of the respective authority.
  • The applicant must ensure that the net worth in the previous five years is positive.
  • The track record of the applicant must be according to the standards prescribed by the SEBI.

Procedure for Starting an Investment Management Firm/ Portfolio Management

  • An investment management firm is also known as a portfolio management firm.
  • The applicant has to pay a fee of Rs. 1,00,000/- to the Securities Exchange Board of India (SEBI) with the requisite documents.
  • The application form along with the prescribed documents have to be submitted to the Investment Management Division of the Securities Exchange Board of India, Mumbai.
  • SEBI will scrutinize the documents. If the authority feels that the applicant meets the standards required as per the eligibility criteria, then such a certificate will be granted by the authority for carrying out the business of an investment management firm.
  • When the authority grants the certificate of registration, the applicant has to pay Rs. 10,00,000/- to the authority for carrying out portfolio management services.
  • The certificate will be valid for three years from the date of registration. The applicant has to make an application for renewal before three months of expiry.
  • The applicant has to ensure that the investment management business is started immediately.

Documents Required for an Investment Management Business/ Portfolio Management

The following documents are required to be submitted to SEBI for portfolio management:

  • Application Form as prescribed as per the SEBI (Mutua Funds) regulations, 1996 (Form A), has to be submitted to the authority.
  • MOA and AOA of the company/ applicant planning to form an asset management company.
  • Qualifications of Directors and Directors Identification Number.
  • Copies of the investment agreement or the management agreement must be submitted.
  • Know Your Client (KYC Verification documents of the applicant).
  • Aadhar Card (Proof of Address).
  • Permanent Account Number (PAN Card).
  • Resolutions are taken in the board meeting/ annual general meeting of the shareholders and the directors.
  • Any other documents as prescribed by the authority.

Enterslice Advantage–Investment Management Service

  • Enterslice is a recognized management consultant in investment management service.
  • Experts at Enterslice have carried out investment advice with the primary objective of adding value to your organization.
  • We have Multifaceted teams of professionals comprising Chartered Accountants, IT professionals, lawyers, and company secretaries.
  • We have extensive experience in handling matters related to mergers, taxation, and accounting matters in India.

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Frequently Asked Questions

Investment management is considered a financial terms that deals with managing different forms of investment. An investment which is managed by an investment manager who has to use judgment in making practical investment decisions based on the expectations of the client.

The relationship between an investment manager and the client is that of a trustee and fiduciary. Hence the portfolio manager must not create any situation where there is a breach of trust. However, the following are the roles played by an investment manager:

• Responsible for overlooking the portfolio of investments.

• Responsible for abiding as per the code of conduct stipulated by SEBI regulations and the SEBI portfolio management regulations.

• Ensure that the client is informed on various portfolio management decisions.

• Ensure to conduct market research and survey on the available options for portfolio management.

• Should inform the client whether portfolio management is viable based on the initial investment by the client.

• Advise the client on different investments.

There is no difference between the terms, investment management and investment advisory. Investment advisory is one form of portfolio management and comes under portfolio management. Advising on various forms of investment would be called investment advisory. In contrast to this, portfolio management would include managing portfolios, advisory services, regular client contact, and other services. Hence, portfolio management is broad when compared to investment management.

Mutual funds are considered as a pool of different forms of investments made by various investors. Investment management would include securities as well as portfolio investments made over some time. Mutual funds would be subject to varied market risks. Though investment management is also subject to different risks associated with the market, experienced professionals guide investment management. The mutual fund industry is also regulated, but professional advice is less compared to portfolio management.

An investment manager is given the license for three years. After this period, the investment manager has to make a fresh application for portfolio management to the SEBI. The fee to be paid is Rs.5 Lakh for the renewal of registration.

Normally, under regulations, there is no law which states that clients have to be charged a professional fee. However, as per the retainer and the terms decided between the portfolio manager and the client, a fee can be charged.

The client must have securities worth Rs 25 Lakhs for a portfolio manager to take on the client. These securities of value can be stock, real estate, and any form of shares.

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