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Damian Maggio on the Importance of Fund Management

 

Fund management is very essential as investors, both institutional and retail, depend on them for achieving their investment goals. The fund management companies work round the clock to evaluate the financial position of the investment assets to help the investors’ financial objectives in a timely manner. The financial objectives might be an education fund for children, a retirement fund, etc.

Damian Maggio says that fund management is associated with managing the cash flows of a financial institution. The liability of the fund manager is to evaluate the maturity schedules of the deposits received and loans given to maintain the asset-liability framework. As the flow of money is continuous and dynamic, it is of critical significance that asset-liability mismatch can be prevented. It is vital for the financial health of the entire banking industry is dependent, which in turn has an impact on the overall economy of the country.

The kinds of Fund Management can be classified by the Client type, Investment type, or the method used for management. The several types of investments managed by fund management professionals include:

  • Trust Fund
  • Mutual Funds
  • Pension Funds
  • Equity fund management
  • Hedge Fund

There are various fund management styles and approaches as per Damian Maggio

  • The Growth at Reasonable Price style will use a mix of Growth and Value investing for constructing the portfolio. This portfolio will typically include a limited number of securities that are showing consistent performance. The sector constituents of such portfolios could be somewhat different from that of the benchmark index to take benefit of growth prospects from these selected sectors as their ability can be maximized under particular conditions.
  • The managers using growth style have a lot of stress on the current and future Corporate Earnings. They are even prepared to pay a premium on securities having powerful growth potential. The growth stocks are usually the cash-cows and are expected to be sold at prices in the northern direction.

 

  • Fundamental style is the basic and one of the most defensive styles which aspire to match the returns of the benchmark index by replicating its sector breakdown and capitalization. The managers will strive to add value to the current portfolio. Such styles are generally adopted by mutual funds to maintain a cautious approach as several retail investors with restricted investments expect an essential return on their overall investment.

Some of the key advantages of fund management are as follows:

  • It enables the investors to access a diversified portfolio that consist of investment in different sectors through different asset classes.
  • It facilitates wealth creation over a period of time with the correct mix of risk and return.

These are some of the key advantages of fund management.

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