Investment Management Company: Should You Create Your Own Firm?

 

An investment management company is an association of people and resources created to perform certain tasks on finding the best investments on the market, meeting the interests and needs of clients. An investment management firm is a mechanism for managing the entire set of assets and participants involved in the implementation of investment activities, as well as the development and use of management methods. The companies search for sources of financing, select the best investment assets to obtain the maximum positive effect at minimum costs and levels of risk.

 

When talking about investment management companies, it is generally accepted to assume that it may include an investment fund and experts that manage the fund. Such companies as corporations can be separated into two types:

• The investment company has its management team: in this case, the founders and the manager are participants in the investment fund. Such investment companies are called Management Investment Companies or Self-Managed I.C.
• The management company that works as an outsource team: in this case, a special company is hired to manage the investment fund. Such investment companies are called Managed Investment Companies.

 

Starting an investment management company is a personal choice. However, let’s look at some valuable points, reasons, and goals before creating your startup.

 

Main Reasons to Start a Business

If you decided to open your investment management firm, let’s see the main reasons why it could be a great idea:

1. You’re a business person and have entrepreneurial skills. You’re ready to make a great impact in the investment market.
2. You can seamlessly create a unique value proposition. Your strategic approach is adopted to make your services distinct from the competitors or current investment firm. It is your unique selling point that makes you attractive to your target audience.
3. You love being an entrepreneur and your current company is changing business concepts and aims, or even going gradually toward an end, so you want to begin your startup.
4. According to the Preqin analytical company, investment business has many nuances in a new digital age, for example for the 2020 period, new ​​actively managed investment managers consistently outperform existing managers in the first three to five years. In a metrics-driven industry, new and growing experts demonstrate their ability, skills, and resilience to perform better.

 

Goals, Functions & Form-Factors

Since the concept of "investment management" is broad, to understand the essence of the process, you can list its main tasks and goals:

• Finding new sources of investment
• Development of methods for managing tangible and intangible assets
• Ensuring a high level of development of the organization through successful investment activities
• Increasing the level of income of the organization from its investments
• Searching relevant projects for investment by analysis and assessment of the company in terms of the level of risks and potential income
• Development of schemes to minimize investment risks
• Finding strategies to minimize costs/reduce cost
• Maintaining the financial stability of the organization during the investment process
• Systematic implementation of investment ideas and projects exactly on time
• Control over the implementation of the above tasks, etc.

 

To achieve the set goals, companies create departments and departments that deal with analytical and organizational work in the field of investments.

 

Investment Management Functions

Planning and forecasting investments (creating and developing a plan of necessary measures to implement the investment strategy) is an important factor to consider when you decide to create your firm. You may consider the following functions of the company as the main factors that will influence your decision on whether to begin the development of startup or focus on the other aims:

• You have to create an organization of investment activities: combining all participants and funds based on the developed methods and methods of making investments;
• Follow regulations of the investment processes: maintaining the financial stability of the organization by solving and eliminating emerging problems. Bringing indicators that deviated from the norm to their planned value. Control over compliance with deadlines;
• Focus on coordination: work with the team aimed at achieving common goals and objectives, the work of all divisions and departments of the company engaged in investment activities;
• Create an encouraging atmosphere for working experts to improve the quality of their work;
• Control and implement plans, check the conscientiousness and validity of the use of the organization's investment resources. Based on the collected data, make changes to the investment strategy, structure, and methods.

 

A responsible and serious approach to organizing the correct and uninterrupted functioning of the investment management process at any enterprise will certainly bring profit. Other factors to consider before opening a firm:

1. Do you have any financial obligations to an existing or previous company? If you want to become an owner of a business, you have to learn more about your scope/length of current agreement debts or covenants.
2. Could you afford to sit on the sidelines throughout the whole period when the markets are experiencing a downturn and the economy looks negative?
3. Do you have a prospective investors base or your current investors are associated with your current firm? Can you launch a fund with the investors?
4. You should think about your team and if you can successfully apply your strategy with them, considering the trading algorithms that may belong to your current firm.
5. Do you have legal rights to advertise/market your business? Make a focus on the investment track record.
6. You should consider another valuable factor: how to identify and remain the best experts and C-level employees.
7. Another crucial point is if you have the connections that can help you grow.
8. Form-factor of building a successful business is its presentation and reputation. You have to create a strong brand with an online presence. That may include the development of a website.
9. Additionally, you have to think about the risks when building a business. You may invest in a team and website, marketing, and even in investment portfolios, but starting a new firm is not easy and has many risks.

 

Final Thoughts

Any commercial activity is aimed at gaining profit and benefits. For development, expansion, growth, you should invest in your business lots of time and money. If all processes are organized competently, it will directly influence the company's growth and competitiveness in the future.

 

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