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131-673: Source: Venture the board includes expertly overseeing speculation portfolios for the benefit of clients to accomplish their monetary objectives. This incorporates key resource designation, developing broadened portfolios, and effectively observing execution while relieving gambles. Speculation administrators use exploration and examination to recognize valuable open doors and pursue informed choices, guaranteeing portfolios line up with client targets and hazard resilience. In addition, successful investment management requires adherence to ethical standards, compliance with regulations, and effective communication with clients. The term investment management

262-417: A Bachelor of Commerce or a Master of Business Administration degree. Some major organizations, including companies, non-profit organizations, and governments, require applicants to managerial or executive positions to hold at minimum bachelor's degree in a field related to administration or management, or in the case of business jobs, a Bachelor of Commerce or a similar degree. At the undergraduate level,

393-438: A blend approach using aspects of each. Funds are often distinguished by asset-based categories such as equity , bonds , property , etc. Also, perhaps most commonly funds are divided by their geographic markets or themes . Examples In most instances whatever the investment aim the fund manager will select an appropriate index or combination of indices to measure its performance against; e.g. FTSE 100 . This becomes

524-442: A chief financial officer , chief technology officer , and so on. They are responsible for controlling and overseeing the operations of the entire organization. They set a " tone at the top " and develop strategic plans , company policies , and make decisions on the overall direction of the organization. In addition, top-level managers play a significant role in the mobilization of outside resources. Senior managers are accountable to

655-407: A nonprofit organization , or a government body through business administration , nonprofit management , or the political science sub-field of public administration respectively. It is the process of managing the resources of businesses, governments, and other organizations. Larger organizations generally have three hierarchical levels of managers, in a pyramid structure: Management

786-517: A "premium" to NAV (i.e., higher than NAV) or, more commonly, at a "discount" to NAV (i.e., lower than NAV). In the United States, at the end of 2018, there were 506 closed-end mutual funds with combined assets of $ 0.25 trillion, accounting for 1% of the U.S. industry. Exchange-traded funds (ETFs) combine characteristics of both closed-end funds and open-end funds. They are structured as open-end investment companies or UITs. ETFs are traded throughout

917-574: A 14% increase in the previous year and was due both to the recovery in equity markets during the year and an inflow of new funds. As of 2011 the US remained by far the biggest source of funds, accounting for around a half of conventional assets under management or some $ 36 trillion. The UK was the second-largest centre in the world and by far the largest in Europe with around 8% of the global total. The 3-P's (Philosophy, Process, and People) are often used to describe

1048-668: A broad understanding of competition, world economies, and politics. In addition, the CEO is responsible for implementing and determining (within the board's framework) the broad policies of the organization. Executive management accomplishes the day-to-day details, including instructions for the preparation of department budgets, procedures, and schedules; appointment of middle-level executives such as department managers; coordination of departments; media and governmental relations; and shareholder communication. Consist of general managers , branch managers and department managers. They are accountable to

1179-482: A dedicated personnel department. By 1929 that number had grown to over one-third. Formal management education became standardized at colleges and universities. Colleges and universities capitalized on the needs of corporations by forming business schools and corporate placement departments. This shift toward formal business education marked the creation of a corporate elite in the US. By about 1900 one finds managers trying to place their theories on what they regarded as

1310-559: A limited term with enforced redemption of shares or units on a specified date. Many collective investment vehicles split the fund into multiple classes of shares or units. The underlying assets of each class are effectively pooled for the purposes of investment management, but classes typically differ in the fees and expenses paid out of the fund's assets. These differences are supposed to reflect different costs involved in servicing investors in various classes; for example: In some cases, by aggregating regular investments by many individuals,

1441-486: A manager's organization and a foe's. The writings of influential Chinese Legalist philosopher Shen Buhai may be considered to embody a rare premodern example of abstract theory of administration. American philosopher Herrlee G. Creel and other scholars find the influence of Chinese administration in Europe by the 12th century. Thomas Taylor Meadows, Britain's consul in Guangzhou , argued in his Desultory Notes on

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1572-538: A market embracing diversity and a rising service industry. Managers are currently being trained to encourage greater equality for minorities and women in the workplace, by offering increased flexibility in working hours, better retraining, and innovative (and usually industry-specific) performance markers. Managers destined for the service sector are being trained to use unique measurement techniques, better worker support, and more charismatic leadership styles. Human resources finds itself increasingly working with management in

1703-462: A movement for evidence-based management . The English verb manage has its roots in the fifteenth-century French verb mesnager , which often referred in equestrian language "to hold in hand the reins of a horse". Also the Italian term maneggiare (to handle, especially tools or a horse) is possible. In Spanish , manejar can also mean to rule the horses. These three terms derive from

1834-552: A personal and business perspective. Greater money management can be achieved by establishing budgets and analyzing costs and income etc. In stock and futures trading , money management plays an important role in every success of a trading system. This is closely related with trading expectancy: “Expectancy” which is the average amount you can expect to win or lose per dollar at risk. Mathematically: Expectancy = (Trading system Winning probability * Average Win) – (Trading system losing probability * Average Loss) So for example even if

1965-537: A philosophy. Critics, however, find this definition useful but far too narrow. The phrase "management is what managers do" occurs widely, suggesting the difficulty of defining management without circularity , the shifting nature of definitions and the connection of managerial practices with the existence of a managerial cadre or of a class . One habit of thought regards management as equivalent to " business administration " and thus excludes management in places outside commerce , for example in charities and in

2096-454: A physical or mechanical mechanism) implies human motivation and implies some sort of successful progress or system outcome. As such, management is not the manipulation of a mechanism (machine or automated program), not the herding of animals, and can occur either in a legal or in an illegal enterprise or environment. From an individual's perspective, management does not need to be seen solely from an enterprise point of view, because management

2227-510: A poor choice of benchmark. Meanwhile, it does not allow the separation of the performance of the market in which the portfolio is invested from that of the manager. The information ratio is a more general form of the Sharpe ratio in which the risk-free asset is replaced by a benchmark portfolio. This measure is relative, as it evaluates portfolio performance about a benchmark, making the result strongly dependent on this benchmark choice. Portfolio alpha

2358-424: A reasonable price (GARP), market neutral , small capitalisation, indexed, etc. Each of these approaches has its distinctive features, adherents, and in any particular financial environment, distinctive risk characteristics. For example, there is evidence that growth styles (buying rapidly growing earnings) are especially effective when the companies able to generate such growth are scarce; conversely, when such growth

2489-508: A retirement plan (such as a 401(k) plan ) may qualify to purchase "institutional" shares (and gain the benefit of their typically lower expense ratios ) even though no members of the plan would qualify individually. Some of the fund classes: One of the main advantages of collective investment is the reduction in investment risk ( capital risk ) by diversification . An investment in a single equity may do well, but it may collapse for investment or other reasons (e.g., Marconi ). If your money

2620-411: A specialist bachelor's degree , with title in "Investment Management" or in "Asset Management" or in "Financial Markets". Increasingly, those with aspirations to work as an investment manager, require further education beyond a bachelor's degree in business, finance, or economics. There is much discussion as to the various factors that can affect the performance of an investment manager, including

2751-420: A thoroughly scientific basis (see scientism for perceived limitations of this belief). Examples include Henry R. Towne 's Science of management in the 1890s, Frederick Winslow Taylor 's The Principles of Scientific Management (1911), Lillian Gilbreth 's Psychology of Management (1914), Frank and Lillian Gilbreth 's Applied motion study (1917), and Henry L. Gantt 's charts (1910s). J. Duncan wrote

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2882-428: A three-factor model to describe portfolio normal returns ( Fama–French three-factor model ). Carhart (1997) proposed adding momentum as a fourth factor to allow the short-term persistence of returns to be taken into account. Also of interest for performance measurement is Sharpe's (1992) style analysis model, in which factors are style indices. This model allows a custom benchmark for each portfolio to be developed, using

3013-405: A trading system has 60% losing probability and only 40% winning of all trades, using money management a trader can set his average win substantially higher compared to his average loss in order to produce a profitable trading system. If he set his average win at around $ 400 per trade (this can be done using proper exit strategy) and managing/limiting the losses to around $ 100 per trade; the expectancy

3144-399: A training capacity to help collect management data on the success (or failure) of management actions with employees. Good practices identified for managers include "walking the shop floor", and, especially for managers who are new in post, identifying and achieving some "quick wins" which demonstrate visible success in establishing appropriate objectives. Leadership writer John Kotter uses

3275-402: A whole. Another example of passive management is the " buy and hold " method used by many traditional unit investment trusts where the portfolio is fixed from outset. Additionally, some funds use a hybrid management strategy of enhanced indexing , in which the manager minimizes costs by broadly following a passive indexing strategy, but has the discretion to actively deviate from the index in

3406-576: A wide range of investment aims either targeting specific geographic regions ( e.g., emerging markets or Europe) or specified industry sectors ( e.g., technology). Depending on the country there is normally a bias towards the domestic market due to familiarity, and the lack of currency risk. Funds are often selected on the basis of these specified investment aims, their past investment performance, and other factors such as fees. The first (recorded) professionally managed investment funds or collective investment schemes, such as mutual funds , were established in

3537-788: A winning or losing trading system, such as %Loss probability > %Win probability). Investment funds An investment fund is a way of investing money alongside other investors in order to benefit from the inherent advantages of working as part of a group such as reducing the risks of the investment by a significant percentage. These advantages include an ability to: It remains unclear whether professional active investment managers can reliably enhance risk adjusted returns by an amount that exceeds fees and expenses of investment management. Terminology varies with country but investment funds are often referred to as investment pools , collective investment vehicles , collective investment schemes , managed funds , or simply funds . The regulatory term

3668-627: Is undertaking for collective investment in transferable securities , or short collective investment undertaking (cf. Law ). An investment fund may be held by the public, such as a mutual fund , exchange-traded fund , special-purpose acquisition company or closed-end fund , or it may be sold only in a private placement , such as a hedge fund or private equity fund . The term also includes specialized vehicles such as collective and common trust funds, which are unique bank-managed funds structured primarily to commingle assets from qualifying pension plans or trusts. Investment funds are promoted with

3799-653: Is a strategic technique to make money yield the highest interest-output value for any amount spent. Spending money to satisfy cravings (regardless of whether they can justifiably be included in a budget) is a natural human phenomenon. The idea of money management techniques has been developed to reduce the amount that individuals, firms, and institutions spend on items that add no significant value to their living standards, long-term portfolios, and assets. Warren Buffett , in one of his documentaries, admonished prospective investors to embrace his highly esteemed "frugality" ideology. This involves making every financial transaction worth

3930-441: Is a systematic risk that all the shares could be affected by adverse market changes. To avoid this systematic risk investment managers may diversify into different non-perfectly-correlated asset classes. For example, investors might hold their assets in equal parts in equities and fixed income securities. If one investor had to buy a large number of direct investments, the amount this person would be able to invest in each holding

4061-911: Is an essential function in improving one's life and relationships . Management is therefore everywhere and it has a wider range of application. Communication and a positive endeavor are two main aspects of it either through enterprise or through independent pursuit. Plans, measurements , motivational psychological tools, goals, and economic measures (profit, etc.) may or may not be necessary components for there to be management. At first, one views management functionally, such as measuring quantity, adjusting plans , and meeting goals , but this applies even in situations where planning does not take place. From this perspective, Henri Fayol (1841–1925) considers management to consist of five functions : In another way of thinking, Mary Parker Follett (1868–1933), allegedly defined management as "the art of getting things done through people". She described management as

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4192-415: Is around: Expectancy = (Trading system Winning probability * Average Win) – (Trading system losing probability * Average Loss) Expectancy = (0.4 x 400) - (0.6 x 100)=$ 160 - $ 60 = $ 100 net average profit per trade (of course commissions are not included in the computations). Therefore, the key to successful money management is maximizing every winning trades and minimizing losses (regardless whether you have

4323-467: Is because equities are riskier (more volatile) than bonds which are themselves riskier than cash. Against the background of the asset allocation, fund managers consider the degree of diversification that makes sense for a given client (given its risk preferences) and construct a list of planned holdings accordingly. The list will indicate what percentage of the fund should be invested in each particular stock or bond. The theory of portfolio diversification

4454-458: Is built into the vehicle. Often referred to as commission or load (in the U.S. ) this charge may be applied at the start of the plan or as an ongoing percentage of the fund value each year. While this cost will diminish your returns it could be argued that it reflects a separate payment for an advice service rather than a detrimental feature of collective investment vehicles. Indeed, it is often possible to purchase units or shares directly from

4585-412: Is equitably divided into shares which vary in price in direct proportion to the variation in value of the fund's net asset value . Each time money is invested, new shares or units are created to match the prevailing share price; each time shares are redeemed, the assets sold match the prevailing share price. In this way there is no supply or demand created for shares and they remain a direct reflection of

4716-502: Is explained below in specifications of their different responsibilities and likely job titles. The top or senior layer of management is a small group which consists of the board of directors (including non-executive directors , executive directors and independent directors ), president , vice-president , CEOs and other members of the C-level executives. Different organizations have various members in their C-suite, which may include

4847-419: Is invested in such a failed holding you could lose your capital. By investing in a range of equities (or other securities) the capital risk is reduced. This investment principle is often referred to as spreading risk . Collective investments by their nature tend to invest in a range of individual securities. However, if the securities are all in a similar type of asset class or market sector then there

4978-514: Is likely to be small. Dealing costs are normally based on the number and size of each transaction, therefore the overall dealing costs would take a large chunk out of the capital (affecting future profits). An investor that chooses to use an investment fund as a way to invest his or her money does not need to spend as much personal time making investment decisions, doing investment research, or performing actual trades. Instead, these actions and decisions will be done by one or more fund managers managing

5109-418: Is obtained by measuring the difference between the return of the portfolio and that of a benchmark portfolio. This measure appears to be the only reliable performance measure to evaluate active management. we have to distinguish between normal returns, provided by the fair reward for portfolio exposure to different risks, and obtained through passive management, from abnormal performance (or outperformance) due to

5240-422: Is often used to refer to the management of investment funds , most often specializing in private and public equity , real assets , alternative assets , and/or bonds. The more generic term asset management may refer to management of assets not necessarily primarily held for investment purposes. Most investment management clients can be classified as either institutional or retail/advisory , depending on if

5371-404: Is plentiful, then there is evidence that value styles tend to outperform the indices particularly successfully. Large asset managers are increasingly profiling their equity portfolio managers to trade their orders more effectively. While this strategy is less effective with small-cap trades, it has been effective for portfolios with large-cap companies. Fund performance is often thought to be

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5502-405: Is taught across different disciplines at colleges and universities. Prominent major degree programs in management include Management , Business Administration and Public Administration . Social scientists study management as an academic discipline , investigating areas such as social organization , organizational adaptation , and organizational leadership . In recent decades, there has been

5633-615: Is that the financial "products" that are sold to the public are sufficiently transparent, with full disclosure about the nature of the terms. In the United Kingdom, the primary statute is the Financial Services and Markets Act 2000 , where Part XVII, sections 235 to 284 deal with the requirements for a collective investment scheme to operate. It states in section 235 that a "collective investment scheme" means "any arrangements with respect to property of any description, including money,

5764-437: Is that the investment manager prefers a closer, more open, and honest relationship with a company's management team than would exist if they exercised control; allowing them to make a better investment decision. The national context in which shareholder representation considerations are set is variable and important. The USA is a litigious society and shareholders use the law as a lever to pressure management teams. In Japan, it

5895-406: Is that you may lose the money you invest—your capital. This risk is therefore often referred to as capital risk . If the assets you invest in are held in another currency there is a risk that currency movements alone may affect the value. This is referred to as currency risk . Management Management (or managing ) is the administration of organizations, whether they are a business ,

6026-557: Is the case when a large active manager sells his position in a company, leading to (possibly) a decline in the stock price, but more importantly a loss of confidence by the markets in the management of the company, thus precipitating changes in the management team. Some institutions have been more vocal and active in pursuing such matters; for instance, some firms believe that there are investment advantages to accumulating substantial minority shareholdings (i.e. 10% or more) and putting pressure on management to implement significant changes in

6157-401: Is the midway management of a categorized organization, being secondary to the senior management but above the deepest levels of operational members. An operational manager may be well-thought-out by middle management or may be categorized as a non-management operator, liable to the policy of the specific organization. The efficiency of the middle level is vital in any organization since it bridges

6288-639: Is the most popular professional degree at the master's level and can be obtained from many universities in the United States. MBA programs provide further education in management and leadership for graduate students. Other master's degrees in business and management include Master of Management (MM) and the Master of Science (M.Sc.) in business administration or management, which is typically taken by students aiming to become researchers or professors. There are also specialized master's degrees in administration for individuals aiming at careers outside of business , such as

6419-422: Is to report the after-tax position of some standard taxpayer. Performance measurement should not be reduced to the evaluation of fund returns alone, but must also integrate other fund elements that would be of interest to investors, such as the measure of risk taken. Several other aspects are also part of performance measurement: evaluating if managers have succeeded in reaching their objective, i.e. if their return

6550-439: Is traditional for shareholders to be below in the 'pecking order', which often allows management and labor to ignore the rights of the ultimate owners. Whereas US firms generally cater to shareholders, Japanese businesses generally exhibit a stakeholder mentality, in which they seek consensus amongst all interested parties (against a background of strong unions and labor legislation ). Conventional assets under management of

6681-413: Is what investment management firms are paid for. Asset classes exhibit different market dynamics, and different interaction effects; thus, the allocation of money among asset classes will have a significant effect on the performance of the fund. Some research suggests that allocation among asset classes has more predictive power than the choice of individual holdings in determining portfolio return. Arguably,

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6812-450: The CAPM , allowing a better description of portfolio risks and a more accurate evaluation of a portfolio's performance. For example, Fama and French (1993) have highlighted two important factors that characterize a company's risk in addition to market risk. These factors are the book-to-market ratio and the company's size as measured by its market capitalization. Fama and French-, therefore proposed

6943-581: The Doctor of Business Administration (DBA), the Doctor of Public Administration (DPA), the Ph.D. in business administration, the Ph.D. in management, and the Ph.D. in political science with a concentration in public administration. In the 2010s, doctorates in business administration and management were available with many specializations. While management trends can change fast, the long-term trend in management has been defined by

7074-837: The Dutch Republic . Amsterdam-based businessman Abraham van Ketwich (also known as Adriaan van Ketwich) is often credited as the originator of the world's first mutual fund. The term "collective investment scheme" is a legal concept deriving initially from a set of European Union Directives to regulate mutual fund investment and management. The Undertakings for Collective Investment in Transferable Securities Directives 85/611/EEC , as amended by 2001/107/EC and 2001/108/EC (typically known as UCITS for short) created an EU-wide structure, so that funds fulfilling its basic regulations could be marketed in any member state. The basic aim of collective investment scheme regulation

7205-436: The Master of Public Administration (MPA) degree (also offered as a Master of Arts or Master of Science in public administration in some universities), for students aiming to become managers or executives in the public service and the Master of Health Administration , for students aiming to become managers or executives in the health care and hospital sector. Management doctorates are the most advanced terminal degrees in

7336-607: The benchmark to measure success or failure against. The aim of most funds is to make money by investing in assets to obtain a real return (i.e. better than inflation). The philosophy used to manage the fund's investment vary and two opposing views exist. Active management —Active managers seek to outperform the market as a whole, by selectively holding securities according to an investment strategy . Therefore, they employ dynamic portfolio strategies, buying and selling investments with changing market conditions, based on their belief that particular individual holdings or sections of

7467-795: The government jobs . Many colleges and universities also offer certificates and diplomas in business administration or management, which typically require one to two years of full-time study. To manage technological areas, one often needs an undergraduate degree in a STEM area . At the graduate level students aiming at careers as managers or executives may choose to specialize in major subareas of management or business administration such as entrepreneurship , human resources , international business , organizational behavior , organizational theory , strategic management , accounting , corporate finance , entertainment, global management, healthcare management , investment management , sustainability and real estate . A Master of Business Administration (MBA)

7598-566: The public sector . More broadly, every organization must "manage" its work, people, processes, technology, etc. to maximize effectiveness. Nonetheless, many people refer to university departments that teach management as " business schools ". Some such institutions (such as the Harvard Business School ) use that name, while others (such as the Yale School of Management ) employ the broader term "management". English speakers may also use

7729-414: The 1940s, Patrick Blackett worked in the development of the applied-mathematics science of operations research , initially for military operations. Operations research, sometimes known as " management science " (but distinct from Taylor's scientific management ), attempts to take a scientific approach to solving decision problems and can apply directly to multiple management problems, particularly in

7860-668: The Government and People of China (1847) that "the long duration of the Chinese empire is solely and altogether owing to the good government which consists in the advancement of men of talent and merit only," and that the British must reform their civil service by making the institution meritocratic . Influenced by the ancient Chinese imperial examination , the Northcote–Trevelyan Report of 1854 recommended that recruitment should be on

7991-539: The Indian Arthashastra by Chanakya (written around 300 BC), and The Prince by Italian author Niccolò Machiavelli ( c.  1515 ). Written in 1776 by Adam Smith , a Scottish moral philosopher , The Wealth of Nations discussed efficient organization of work through division of labour . Smith described how changes in processes could boost productivity in the manufacture of pins . While individuals could produce 200 pins per day, Smith analyzed

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8122-540: The US or BI-SAM in Europe) compile aggregate industry data, e.g., showing how funds in general performed against given performance indices and peer groups over various periods. In a typical case (let us say an equity fund ), the calculation would be made (as far as the client is concerned) every quarter and would show a percentage change compared with the prior quarter (e.g., +4.6% total return in US dollars). This figure would be compared with other similar funds managed within

8253-523: The United States and less so in Europe. However, as of 2019, the lines were becoming blurred. Money management is used in investment management and deals with the question of how much risk a decision maker should take in situations where uncertainty is present. More precisely what percentage or what part of the decision maker's wealth should be put into risk in order to maximize the decision maker's utility function . Money management can mean gaining greater control over outgoings and incomings, both in

8384-531: The United States, refers to both a firm that provides investment management services and to the individual who directs fund management decisions. The five largest asset managers are holding 22.7 percent of the externally held assets. Nevertheless, the market concentration, measured via the Herfindahl-Hirschmann Index , could be estimated at 173.4 in 2018, showing that the industry is not very concentrated. The business of investment has several facets,

8515-429: The acid test of fund management, and in the institutional context, accurate measurement is a necessity. For that purpose, institutions measure the performance of each fund (and usually for internal purposes components of each fund) under their management, and performance is also measured by external firms that specialize in performance measurement. The leading performance measurement firms (e.g. Russell Investment Group in

8646-557: The areas of logistics and operations. Some of the later 20th-century developments include the theory of constraints (introduced in 1984), management by objectives (systematized in 1954), re-engineering (the early 1990s), Six Sigma (1986), management by walking around (1970s), the Viable system model (1972), and various information-technology -driven theories such as agile software development (so-named from 2001), as well as group-management theories such as Cog's Ladder (1972) and

8777-421: The basis of merit determined through competitive examination, candidates should have a solid general education to enable inter-departmental transfers, and promotion should be through achievement rather than "preferment, patronage, or purchase". This led to implementation of Her Majesty's Civil Service as a systematic, meritocratic civil service bureaucracy. Like the British, the development of French bureaucracy

8908-418: The best available evidence. As with other evidence-based practice, this is based on the three principles of published peer-reviewed (often in management or social science journals) research evidence that bears on whether and why a particular management practice works; judgment and experience from contextual management practice, to understand the organization and interpersonal dynamics in a situation and determine

9039-467: The business. In some cases, institutions with minority holdings work together to force management change. Perhaps more frequent is the sustained pressure that large institutions bring to bear on management teams through persuasive discourse and PR. On the other hand, some of the largest investment managers—such as BlackRock and Vanguard —advocate simply owning every company, reducing the incentive to influence management teams. A reason for this last strategy

9170-484: The centuries faced the problems of exploiting and motivating a dependent but sometimes unenthusiastic or recalcitrant workforce, but many pre-industrial enterprises , given their small scale, did not feel compelled to face the issues of management systematically. However, innovations such as the spread of Arabic numerals (5th to 15th centuries) and the codification of double-entry book-keeping (1494) provided tools for management assessment, planning and control. With

9301-577: The changing workplaces of the Industrial Revolution in the 18th and 19th centuries, military theory and practice contributed approaches to managing the newly popular factories . Given the scale of most commercial operations and the lack of mechanized record-keeping and recording before the Industrial Revolution, it made sense for most owners of enterprises in those times to carry out management functions by and for themselves. But with

9432-514: The client is an institution or private individual/ family trust . Investment managers who specialize in advisory or discretionary management on behalf of (normally wealthy) private investors may often refer to their services as money management or portfolio management within the context of " private banking ". Wealth management by financial advisors takes a more holistic view of a client, with allocations to particular asset management strategies. The term fund manager, or investment adviser in

9563-468: The companies in which they hold shares (e.g., to hold managers to account, to ensure Board's effective functioning). Such action would add a pressure group to those (the regulators and the Board) overseeing management. However, there is the problem of how the institution should exercise this power. One way is for the institution to decide, the other is for the institution to poll its beneficiaries. Assuming that

9694-441: The companies via the voting rights the shares carry and the consequent ability to pressure managements, and if necessary out-vote them at annual and other meetings. In practice, the ultimate owners of shares often do not exercise the power they collectively hold (because the owners are many, each with small holdings); financial institutions (as agents) sometimes do. Institutional shareholders should exercise more active influence over

9825-525: The day on a stock exchange. An arbitrage mechanism is used to keep the trading price close to net asset value of the ETF holdings. At the end of 2018, there were 1,988 ETFs in the United States with combined assets of $ 3.3 trillion, accounting for 16% of the U.S. industry. Unit investment trusts (UITs) are issued to the public only once when they are created. UITs generally have a limited life span, established at creation. Investors can redeem shares directly with

9956-411: The day-to-day activities of the organization. However, this varies depending on the type (e.g., public versus private), size, and culture of the organization. These directors are theoretically liable for breaches of that duty and are typically insured under directors and officers liability insurance . Fortune 500 directors are estimated to spend 4.4 hours per week on board duties, and median compensation

10087-616: The employment of professional fund managers, research (of individual assets and asset classes ), dealing, settlement, marketing, internal auditing , and the preparation of reports for clients. The largest financial fund managers are firms that exhibit all the complexity their size demands. Apart from the people who bring in the money (marketers) and the people who direct investment (the fund managers), there are compliance staff (to ensure accord with legislative and regulatory constraints), internal auditors of various kinds (to examine internal systems and controls), financial controllers (to account for

10218-799: The expense: 1. avoid any expense that appeals to vanity or snobbery 2. always go for the most cost-effective alternative (establishing small quality-variance benchmarks, if any) 3. favor expenditures on interest-bearing items over all others 4. establish the expected benefits of every desired expenditure using the canon of plus/minus/nil to the standard of living value system. These techniques are investment-boosting and portfolio-multiplying. There are certain companies as well that offer services, provide counseling and different models for managing money. These are designed to manage grace assets and make them grow. Wealth management , where financial advisors perform financial planning for clients, has traditionally served as an intermediary to investment managers in

10349-414: The field of business and management. Most individuals obtaining management doctorates take the programs to obtain the training in research methods, statistical analysis, and writing academic papers that they will need to seek careers as researchers, senior consultants, and/or professors in business administration or management. There are several types of management doctorates: the Doctor of Management (DM),

10480-510: The first college management textbook in 1911. In 1912 Yoichi Ueno introduced Taylorism to Japan and became the first management consultant of the " Japanese management style ". His son Ichiro Ueno pioneered Japanese quality assurance . The first comprehensive theories of management appeared around 1920. The Harvard Business School offered the first Master of Business Administration degree (MBA) in 1921. People like Henri Fayol (1841–1925) and Alexander Church (1866–1936) described

10611-551: The fund at any time (similar to an open-end fund) or wait to redeem them upon the trust's termination. Less commonly, they can sell their shares in the open market. Unlike other types of mutual funds, unit investment trusts do not have a professional investment manager. Their portfolio of securities is established at the creation of the UIT. In the United States, at the end of 2018, there were 4,917 UITs with combined assets of less than $ 0.1 trillion. Some collective investment vehicles have

10742-546: The fund. Each fund has a defined investment goal to describe the remit of the investment manager and to help investors decide if the fund is right for them. The investment aims will typically fall into the broad categories of Income (value) investment or Growth investment. Income or value based investment tends to select stocks with strong income streams, often more established businesses. Growth investment selects stocks that tend to reinvest their income to generate growth. Each strategy has its critics and proponents; some prefer

10873-721: The gap between top-level and bottom-level staff. Their functions include: Line managers include supervisors , section leaders, forepersons, and team leaders. They focus on controlling and directing regular employees. They are usually responsible for assigning employees tasks, guiding and supervising employees on day-to-day activities, ensuring the quality and quantity of production and/or service, making recommendations and suggestions to employees on their work, and channeling employee concerns that they cannot resolve to mid-level managers or other administrators. Low-level or "front-line" managers also act as role models for their employees. In some types of work, front-line managers may also do some of

11004-479: The global fund management industry increased by 10% in 2010, to $ 79.3 trillion. Pension assets accounted for $ 29.9 trillion of the total, with $ 24.7 trillion invested in mutual funds and $ 24.6 trillion in insurance funds. Together with alternative assets (sovereign wealth funds, hedge funds, private equity funds, and exchange-traded funds) and funds of wealthy individuals, assets of the global fund management industry totalled around $ 117 trillion. Growth in 2010 followed

11135-777: The growing size and complexity of organizations, a distinction between owners (individuals, industrial dynasties, or groups of shareholders ) and day-to-day managers (independent specialists in planning and control) gradually became more common. The field of management originated in ancient China, including possibly the first highly centralized bureaucratic state, and the earliest (by the second century BC) example of an administration based on merit through testing . Some theorists have cited ancient military texts as providing lessons for civilian managers. For example, Chinese general Sun Tzu in his 6th-century BC work The Art of War recommends (when re-phrased in modern terminology) being aware of and acting on strengths and weaknesses of both

11266-475: The growth achieved a net loss is achieved. This can greatly increase the investment risk of the fund by increased volatility and exposure to increased capital risk. Gearing was a major contributory factor in the collapse of the split capital investment trust debacle in the UK in 2002. Collective investment vehicles vary in availability depending on their intended investor base: Some vehicles are designed to have

11397-577: The heart of the investment management industry are the managers who invest and divest client investments. A certified company investment advisor should conduct an assessment of each client's individual needs and risk profile. The advisor then recommends appropriate investments. The different asset class definitions are widely debated, but four common divisions are cash and fixed income (such as certificates of deposit), stocks , bonds and real estate . The exercise of allocating funds among these assets (and among individual securities within each asset class)

11528-420: The hopes of earning modestly higher returns. An example of active management success When analysing investment performance, statistical measures are often used to compare 'funds'. These statistical measures are often reduced to a single figure representing an aspect of past performance: Depending on the nature of the investment, the type of 'investment' risk will vary. A common concern with any investment

11659-410: The influence of the business cycle. This can be difficult however and, industry-wide, there is a serious preoccupation with short-term numbers and the effect on the relationship with clients (and resultant business risks for the institutions). One effective solution to this problem is to include a minimum evaluation period in the investment management agreement, whereby the minimum evaluation period equals

11790-566: The institution (for purposes of monitoring internal controls), with performance data for peer group funds, and with relevant indices (where available) or tailor-made performance benchmarks where appropriate. The specialist performance measurement firms calculate quartile and decile data and close attention would be paid to the (percentile) ranking of any fund. It is probably appropriate for an investment firm to persuade its clients to assess performance over longer periods (e.g., 3 to 5 years) to smooth out very short-term fluctuations in performance and

11921-414: The institution polls, should it then: (i) Vote the entire holding as directed by the majority of votes cast? (ii) Split the vote (where this is allowed) according to the proportions of the vote? (iii) Or respect the abstainers and only vote the respondents' holdings? The price signals generated by large active managers holding or not holding the stock may contribute to management change. For example, this

12052-413: The institutions' own money and costs), computer experts, and "back office" employees (to track and record transactions and fund valuations for up to thousands of clients per institution). Key problems include: Institutions often control huge shareholdings. In most cases, they are acting as fiduciary agents rather than principals (direct owners). The owners of shares theoretically have great power to alter

12183-424: The investment fund. The fund manager managing the investment decisions on behalf of the investors will of course expect remuneration. This is often taken directly from the fund assets as a fixed percentage each year or sometimes a variable (performance based) fee. If the investor managed their own investments, this cost would be avoided. Often the cost of advice given by a stockbroker or financial adviser

12314-484: The investment manager's investment horizon. An enduring problem is whether to measure before-tax or after-tax performance. After-tax measurement represents the benefit to the investor, but investors' tax positions may vary. Before-tax measurement can be misleading, especially in regimens that tax realised capital gains (and not unrealised). It is thus possible that successful active managers (measured before tax) may produce miserable after-tax results. One possible solution

12445-453: The linear combination of style indices that best replicate portfolio style allocation, and leads to an accurate evaluation of portfolio alpha. However, certain research indicates that internet data may not necessarily enhance the precision of predictive models. At the undergraduate level, several business schools and universities internationally offer "Investments" as a subject within their degree; further, some universities, in fact, confer

12576-545: The manager's qualifications. Some conclude that there is no evidence that any particular qualification enhances the manager's ability to select investments that result in above-average returns. But see also Chartered Financial Analyst § Efficacy of the CFA program re related research. Money management is the process of expense tracking, investing, budgeting, banking and evaluating taxes of one's money, which includes investment management and wealth management . Money management

12707-413: The manager's skill (or luck), whether through market timing , stock picking , or good fortune. The first component is related to allocation and style investment choices, which may not be under the sole control of the manager, and depends on the economic context, while the second component is an evaluation of the success of the manager's decisions. Only the latter, measured by alpha, allows the evaluation of

12838-515: The manager's true performance (but then, only if you assume that any outperformance is due to the skill and not luck). Portfolio returns may be evaluated using factor models. The first model, proposed by Jensen (1968), relies on the CAPM and explains portfolio returns with the market index as the only factor. It quickly becomes clear, however, that one factor is not enough to explain the returns very well and that other factors have to be considered. Multi-factor models were developed as an alternative to

12969-411: The market will perform better than others. Passive management —Passive managers stick to a portfolio strategy determined at outset of the fund and not varied thereafter, aiming to minimize the ongoing costs of maintaining the portfolio . Many passive funds are index funds , which attempt to replicate the performance of a market index by holding securities proportionally to their value in the market as

13100-487: The most common business programs are the Bachelor of Business Administration (BBA) and Bachelor of Commerce (B.Com.). These typically comprise a four-year program designed to give students an overview of the role of managers in planning and directing within an organization. Course topics include accounting, financial management, statistics, marketing, strategy, and other related areas. Many other undergraduate degrees include

13231-484: The need for clerks, bookkeepers, secretaries and managers expanded. The demand for trained managers led college and university administrators to consider and move forward with plans to create the first schools of business on their campuses. At the turn of the twentieth century, the need for skilled and trained managers had become increasingly apparent. The demand occurred as personnel departments began to expand rapidly. In 1915, less than one in twenty manufacturing firms had

13362-486: The notion of rewarding risk and produced the first performance indicators, be they risk-adjusted ratios ( Sharpe ratio , information ratio) or differential returns compared to benchmarks (alphas). The Sharpe ratio is the simplest and best-known performance measure. It measures the return of a portfolio over above the risk-free rate, compared to the total risk of the portfolio. This measure is said to be absolute, as it does not refer to any benchmark, avoiding drawbacks related to

13493-465: The organization. Colleges and universities around the world offer bachelor's degrees, graduate degrees, diplomas, and certificates in management; generally within their colleges of business, business schools, or faculty of management but also in other related departments. Higher education has been characterized as a necessary factor in the managerial revolution in the 20th century. While some professions require academic credentials in order to work in

13624-554: The phenomenon of management from a sociological perspective. Peter Drucker (1909–2005) wrote one of the earliest books on applied management: Concept of the Corporation (published in 1946). It resulted from Alfred Sloan (chairman of General Motors until 1956) commissioning a study of the organization . Drucker went on to write 39 books, many in the same vein. H. Dodge, Ronald Fisher (1890–1962), and Thornton C. Fry introduced statistical techniques into management studies. In

13755-465: The phrase "Short-Term Wins" to express the same idea. As in all work, achieving an appropriate work-life balance for self and others is an important management practice. Evidence-based management is an emerging movement to use the current, best evidence in management and decision-making . It is part of the larger movement towards evidence-based practices . Evidence-based management entails managerial decisions and organizational practices informed by

13886-415: The plans and goals that affect the entire organization. These individuals typically have titles such as executive vice president, president, managing director, chief operating officer, chief executive officer, or board chairman. These managers are classified in a hierarchy of authority and perform different tasks. In many organizations, the number of managers at every level resembles a pyramid. Each level

14017-411: The power to borrow money to make further investments; a process known as gearing or leverage . If markets are growing rapidly this can allow the vehicle to take advantage of the growth to a greater extent than if only the subscribed contributions were invested. However this premise only works if the cost of the borrowing is less than the increased growth achieved. If the borrowing costs are more than

14148-494: The pre-1861 slave-based sector of the US economy. That environment saw 4 million people, as the contemporary usages had it, "managed" in profitable quasi- mass production before wage slavery eclipsed chattel slavery. Salaried managers as an identifiable group first became prominent in the late 19th century. As large corporations began to overshadow small family businesses the need for personnel management positions became more necessary. Businesses grew into large corporations and

14279-508: The profession (e.g., law, medicine, and engineering, which require, respectively the Bachelor of Law , Doctor of Medicine , and Bachelor of Engineering degrees), management and administration positions do not necessarily require the completion of academic degrees. Some well-known senior executives in the US who did not complete a degree include Steve Jobs , Bill Gates and Mark Zuckerberg . However, many managers and executives have completed some type of business or management training, such as

14410-445: The providers without bearing this cost. Although the investor can choose the type of fund to invest in, they have no control over the choice of individual holdings that make up the fund. If the investor holds shares directly, he has the right to attend the company's annual general meeting and vote on important matters. Investors in a collective investment vehicle often have none of the rights connected with individual investments within

14541-445: The purpose or effect of which is to enable persons taking part in the arrangements (whether by becoming owners of the property or any part of it or otherwise) to participate in or receive profits or income arising from the acquisition, holding, management or disposal of the property or sums paid out of such profits or income". Collective investment vehicles may be formed under company law , by legal trust or by statute . The nature of

14672-466: The reasons why the manager can produce above-average results. Ethical or religious principles may be used to determine or guide the way in which money is invested. Christians tend to follow the Biblical scripture . Several religions follow Mosaic law which proscribed the charging of interest . The Quakers forbade involvement in the slave trade and so started the concept of ethical investment . At

14803-434: The risks and benefits of available actions; and the preferences and values of those affected. Some see management as a late-modern (in the sense of late modernity ) conceptualization. On those terms it cannot have a pre-modern history – only harbingers (such as stewards ). Others, however, detect management-like thought among ancient Sumerian traders and the builders of the pyramids of ancient Egypt . Slave owners through

14934-489: The same tasks that employees do, at least some of the time. For example, in some restaurants, the front-line managers will also serve customers during a very busy period of the day. In general, line managers are considered part of the workforce and not part of the organization's proper management despite performing traditional management functions. Front-line managers typically provide: Some front-line managers may also provide career planning for employees who aim to rise within

15065-582: The semantic development of the English word management in the 17th and 18th centuries. Views on the definition and scope of management include: Management involves identifying the mission , objective, procedures , rules and manipulation of the human capital of an enterprise to contribute to the success of the enterprise. Scholars have focused on the management of individual, organizational, and inter-organizational relationships. This implies effective communication : an enterprise environment (as opposed to

15196-427: The shareholders, the general public, and public bodies that oversee corporations and similar organizations. Some members of the senior management may serve as the public face of the organization, and they may make speeches to introduce new strategies or appear in marketing . The board of directors is typically primarily composed of non-executives who owe a fiduciary duty to shareholders and are not closely involved in

15327-639: The skill of a successful investment manager resides in constructing the asset allocation, and separating individual holdings, to outperform certain benchmarks (e.g., the peer group of competing funds, bonds, and stock indices). It is important to look at the evidence on the long-term returns to different assets, and to holding period returns (the returns that accrue on average over different lengths of investment). For example, over very long holding periods (e.g. 10+ years) in most countries, equities have generated higher returns than bonds, and bonds have generated higher returns than cash. According to financial theory, this

15458-651: The steps involved in the manufacture and, with 10 specialists, enabled the production of 48,000 pins per day. Classical economists such as Adam Smith (1723–1790) and John Stuart Mill (1806–1873) provided a theoretical background to resource allocation , production (economics) , and pricing issues. About the same time, innovators like Eli Whitney (1765–1825), James Watt (1736–1819), and Matthew Boulton (1728–1809) developed elements of technical production such as standardization , quality-control procedures, cost-accounting , interchangeability of parts, and work-planning . Many of these aspects of management existed in

15589-455: The study of management, such as Bachelor of Arts and Bachelor of Science degrees with a major in business administration or management and the Bachelor of Arts (BA) or Bachelor of Science (BS) in political science (PoliSci) with a concentration in public administration or the Bachelor of Public Administration (B.P.A), a degree designed for individuals aiming to work as bureaucrats in

15720-409: The term "management" or "the management" as a collective word describing the managers of an organization, for example of a corporation . Historically this use of the term often contrasted with the term labor – referring to those being managed. A common management structure of organizations includes three management levels: low-level, middle-level, and top-level managers. Low-level managers manage

15851-479: The top management for their department's function. They devote more time to organizational and directional functions. Their roles can be emphasized as executing organizational plans in conformance with the company's policies and the top management's objectives, defining and discussing information and policies from top management to lower management, and most importantly, inspiring and providing guidance to lower-level managers towards better performance. Middle management

15982-431: The top weaknesses of CEOs were " mentoring skills" and "board engagement", and 10% of companies never evaluated the CEO. The board may also have certain employees (e.g., internal auditors ) report to them or directly hire independent contractors ; for example, the board (through the audit committee ) typically selects the auditor . Helpful skills for top management vary by the type of organization but typically include

16113-524: The two Latin words manus (hand) and agere (to act). The French word for housekeeping , ménagerie , derived from ménager ("to keep house"; compare ménage for "household"), also encompasses taking care of domestic animals. Ménagerie is the French translation of Xenophon 's famous book Oeconomicus ( Ancient Greek : Οἰκονομικός ) on household matters and husbandry . The French word mesnagement (or ménagement ) influenced

16244-466: The underlying assets. A closed-end fund issues a limited number of shares (or units) in an initial public offering (or IPO ) or through private placement. If shares are issued through an IPO, they are then traded on a stock exchange . or directly through the fund manager to create a secondary market subject to market forces . The price that investors receive for their shares may be significantly different from net asset value (NAV); it may be at

16375-497: The various branches of management and their inter-relationships. In the early 20th century, people like Ordway Tead (1891–1973), Walter Scott (1869–1955) and J. Mooney applied the principles of psychology to management. Other writers, such as Elton Mayo (1880–1949), Mary Parker Follett (1868–1933), Chester Barnard (1886–1961), Max Weber (1864–1920), who saw what he called the "administrator" as bureaucrat , Rensis Likert (1903–1981), and Chris Argyris (born 1923) approached

16506-526: The vehicle and its limitations are often linked to its constitutional nature and the associated tax rules for the type of structure within a given jurisdiction. Typically there is: Please see below for general information on specific forms of vehicles in different jurisdictions. The net asset value (NAV) is the value of a vehicle's assets minus the value of its liabilities. The method for calculating this varies between vehicle types and jurisdiction and can be subject to complex regulation. An open-end fund

16637-594: The work of non-managerial individuals who are directly involved with the production or creation of the organization's products. Low-level managers are often called supervisors, but may also be called line managers, office managers, or even foremen. Middle managers include all levels of management between the low level and the top level of the organization. These managers manage the work of low-level managers and may have titles such as department head, project leader, plant manager, or division manager. Top managers are responsible for making organization-wide decisions and establishing

16768-450: Was $ 212,512 in 2010. The board sets corporate strategy, makes major decisions such as major acquisitions, and hires, evaluates, and fires the top-level manager ( chief executive officer or CEO). The CEO typically hires other positions. However, board involvement in the hiring of other positions such as the chief financial officer (CFO) has increased. In 2013, a survey of over 160 CEOs and directors of public and private companies found that

16899-703: Was influenced by the Chinese system. Voltaire claimed that the Chinese had "perfected moral science" and François Quesnay advocated an economic and political system modeled after that of the Chinese. French civil service examinations adopted in the late 19th century were also heavily based on general cultural studies. These features have been likened to the earlier Chinese model. Various ancient and medieval civilizations produced " mirrors for princes " books, which aimed to advise new monarchs on how to govern. Plato described job specialization in 350 BC, and Alfarabi listed several leadership traits in AD 900. Other examples include

17030-413: Was originated by Markowitz (and many others). Effective diversification requires management of the correlation between the asset returns and the liability returns, issues internal to the portfolio (individual holdings volatility), and cross-correlations between the returns. There is a range of different styles of fund management that the institution can implement. For example, growth , value, growth at

17161-527: Was sufficiently high to reward the risks taken; how they compare to their peers; and finally, whether the portfolio management results were due to luck or the manager's skill. The need to answer all these questions has led to the development of more sophisticated performance measures, many of which originate in modern portfolio theory . Modern portfolio theory established the quantitative link that exists between portfolio risk and returns. The capital asset pricing model (CAPM) developed by Sharpe (1964) highlighted

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