What Is Money Management?
Money management is the process of budgeting, saving, investing, spending, or otherwise overseeing the capital usage of an individual or group. The predominant use of the phrase in financial markets is that of an investment professional making investment decisions for large pools of funds, such as mutual funds or pension plans. Money management can also be referred to more narrowly as "investment management" and "portfolio management."
- Money management broadly refers to the process of budgeting, investing, saving, and spending with one's finances.
- Financial advisors and personal finance apps are increasingly common in helping individuals manage their money better.
- Sometimes money management refers more narrowly to investment or portfolio management.
The Basics of Money Management
Money management is a broad term that involves and incorporates services and solutions across the entire investment industry. In the market, consumers have access to a wide range of resources and applications that allow them to individually manage nearly every aspect of their personal finances. As investors increase their net worth they also often seek the services of financial advisors for professional money management. Financial advisors are typically associated with private banking and brokerage services, offering support for holistic money management plans that can involve estate planning, retirement, and more.
Investment company money management is also a central aspect of the investment industry overall. Investment company money management offers individual consumers investment fund options that encompass all investable asset classes in the financial market. Investment company money managers also support the capital management of institutional clients, with investment solutions for institutional retirement plans, endowments, foundations, and more.
In the growing financial technology market, personal finance apps exist to help consumers with nearly every aspect of their personal finances.
Top Money Managers by Assets
Global investment managers offer retail and institutional investment management funds and services that encompass every investment asset class in the industry. Two of the most popular types of funds include actively managed funds and passively managed funds replicating specified indexes with low management fees.
The list below shows the top 5 global money managers by assets under management ($M) as of Q1 2021:
In 1988, BlackRock Inc. (BLK) was launched as a $1 division of the BlackRock Group. By the end of 1993, it boasted $17 billion in AUM. By June of 2020, the most recently available information, that number swelled to a whopping $6.84 trillion, making BlackRock the world's largest investment management firm, with over 12,000 employees, in 70 offices, across 30 countries. BlackRock's ETF division, called iShares, has approximately $1.6 trillion in AUM globally, which amounts to 27% of the group's total assets.
The Vanguard Group
The Vanguard Group is one of the most well-known investment management companies, catering to over 20 million clients across 170 countries. Vanguard was founded by John C. Bogle in 1975, in Valley Forge, Pennsylvania, as a division of Wellington Management Company, where Bogle was previously chairman. Since its launch, Vanguard has grown its total assets to $6.2 trillion as of January 2021. Of its 420 traditional funds and ETFs, 190 are U.S. funds, including the popular 500 Index and Total Stock Market funds.
Fidelity Management & Research Company was founded in 1946 by Edward C. Johnson II. As of September 2020, Fidelity had 32 million customers with $3.2 trillion in total assets. The firm offers 386 mutual funds, including domestic equity, foreign equity, sector-specific, fixed-income, index, money market, and asset allocation funds.
Pacific Investment Management Company, LLC
Global asset management firm Pacific Investment Management Company LLC (PIMCO) was co-founded in 1971, in Newport Beach, California, by bond king Bill Gross. Since its inception, PIMCO has grown its assets under management (AUM) to $2.02 trillion as of September 2020, the most recently available information. The firm houses over 775 investment professionals, each averaging 14 years of investment experience. With over 100 funds under its banner, PIMCO is widely regarded as a leader in the fixed income sector.
Invesco Ltd. (IVZ) has been offering investment management services since the 1940s. In November of 2020, the firm announced that it had $1.2 trillion in AUM, across its 100-plus mutual fund products. The firm offers over 100 ETFs through its Invesco Capital Management LLC division. In 2017, the company saw some decline in AUM. But despite the resulting dip in its stock price, Invesco remains one of the world's top asset management firms.