Portfolio Management

Financial Dictionary -> Investing -> Portfolio Management

Portfolio management includes investment management, project management, project portfolio management, and IT portfolio management. Here, mainly the branch of investment management is dealt with. This type involves professional management of bonds, shares, other securities, and assets with the aim of achieving certain investment goals for clients. The latter can be private investors or institutions such as corporations, retirement funds, and insurance companies. Private investors can participate through investment contracts (directly) or exchange-traded and mutual funds (indirectly).

Asset management represents a multi-sided system, involving thousands of specialists around the globe. It usually refers to the management of group investments, while the more conventional fund management may involve working for institutions or private investors. Asset management comprises of a broad scope of activities such as selection of stocks and monitoring of investments. To put it simple, the process involves handling considerable amounts of money in various currents. Asset management companies aim at offering interesting techniques, concepts, and ideas of fund management. On his own part, the asset manager typically specializes in advisory or discretionary management, working with private investors. The term "private banking" refers to portfolio management for the benefit of very wealthy private investors. Customer service is more focused on the individual, typically with the help of dedicated bank advisors. Private banking offers a variety of services such as wealth management, inheritance, savings, and tax planning for high net individuals.

Investment management includes continuous investment monitoring, asset selection, financial statement analysis, and stock selection. This branch of portfolio management is responsible for trillions in the most common currencies in the world, including the Euro, dollar, pound and yen.

The entities directly responsible for the provision of investment management services are fund managers. This can be a person making fund management decisions or a company offering these services.

Among the goals of portfolio management are to provide balance, maximize the value or profitability of the portfolio, and help implement the strategies of the enterprise.

Returns can be huge when it comes to portfolio management, but major problems can surface. Some of the possible ones include a fall in asset prices, impatient clients, and difficult access to qualified investment managers. A major decline in asset prices can be almost fatal as there is a direct connection between revenue and market valuations. When the going gets rough - meaning in times of poor performance - certain clients may lose patience. In general, good fund performance is hard to sustain. The main problem, however, is related to (lack of) access to qualified managers. First off, competing enterprises tend to headhunt successful fund managers. It is very hard to find a good on3, and those who generate high returns become so rich that they simply start working for themselves and manage their own portfolios.

After you have found a good fund manager, you would be wise to take a deeper look at the organization he or she works for. You need to find out more about its goals, beliefs and values, like whether it does its own research or relies on external information, whether the manager buys value or growth shares, how he decides what to buy and sell, who makes the decisions, is this done in a collective fashion, and so on. You can make a sound decision only if you are as well informed as you can be!