What Is Funds Management?

Funds management is the overseeing and handling of a financial institution's cash flow. The fund manager ensures that the maturity schedules of the deposits coincide with the demand for loans. To do this, the manager looks at both the liabilities and the assets that influence the bank's ability to issue credit.

Funds Management in Action

Funds management—also referred to as asset management—covers any kind of system that maintains the value of an entity. It may be applied to intangible assets (e.g., intellectual property and goodwill), and tangible assets (e.g., equipment and real estate). It is the systematic process of operating, deploying, maintaining, disposing, and upgrading assets in the most cost-efficient and profit-yielding way possible.

A fund manager must pay close attention to cost and risk to capitalize on the cash flow opportunities. A financial institution runs on the ability to offer credit to customers. Ensuring the proper liquidity of the funds is a crucial aspect of the fund manager's position. Funds management can also refer to the management of fund assets.

In the financial world, the term "fund management" describes people and institutions that manage investments on behalf of investors. An example would be investment managers who fix the assets of pension funds for pension investors.

Divisions of Use

Fund management may be divided into four industries:

  • Financial investment industry
  • Infrastructure industry
  • Business and enterprise industry
  • The public sector

The most common use of "fund management" refers to investment management or financial management, which are within the financial sector responsible for managing investment funds for client accounts. The fund manager's duties include studying the client's needs and financial goals, creating an investment plan, and executing the investment strategy.

Classifying Fund Management

Fund management can be classified according to client type, the method used for management, or the investment type.

When classifying fund management according to client type, the fund managers are either business fund managers, corporate fund managers, or personal fund managers who handle investment accounts for individual investors. Personal fund managers cover smaller investment portfolios compared to business fund managers. These funds may be controlled by one fund manager or by a team of many fund managers.

Some funds are managed by hedge fund managers who earn from an upfront fee and a certain percentage of the fund's performance, which serves as an incentive for them to perform to the best of their abilities.