Investment Clients for Portfolio Managers

As a portfolio manager you will be looking after the investment needs of a variety of investment clients whether you are employed by a fund management company or directly contracted by the client. In this article we will describe the key investment clients which can be broadly classified as individuals and institutional investors.

Individual Investors

These are the individuals who are looking at managing their wealth with a variety of goals. Some investors may have a short-term goal of providing for their children’s education or marriage, while some investors may have a long-term goal of saving for their retirement. These different investors will also have different risk profiles. Someone who is more scared of risk may want his money to be invested in very safe assets such as government bonds or fixed deposits, while someone else may want to take more risk for extra returns which may be done by investing in stocks. One investor may be looking for growth of his capital while another may be looking for a regular income which will involve investing in bonds and dividend-paying stocks. The investment needs of the individual investors will vary depending on their financial needs, requirements, myths and beliefs.

Institutional Investors

The major institutional investors include banks, insurance companies, investment companies, university endowments, foundations, and Defined Benefit pension plans. All these institutional investors have their own investment objectives, time horizon, risk profiles, and income needs.

For example the university endowment funds are created for the purpose of providing continual financial support to the university. They typically have long time horizon and high risk tolerance. The largest endowment fund is that of Harvard University. Similarly the charitable foundations invest the donations that they receive in line with the foundation’s grant objectives. Banks invest their excess returns, which is generally more conservative in nature by investing more in bonds and money-market instruments and less in equities. Banks have a short time-horizon, low risk tolerance, and high liquidity needs.  The insurance companies invest the insurance premium they receive. The money will be needed for settling claims and therefore the investments should be in accordance with the claim statistics. In general they follow a conservative approach to investing because of the crucial nature of the use of the money. They have low time horizon, low risk tolerance, low income needs, but high liquidity needs.

The investment companies are the companies that manage mutual funds. The investments for each mutual fund will be different and will be according to the individual fund’s objectives. There are a variety of mutual funds suiting the needs to every type of investor. The defined benefit pension plans are contributions of employers towards the retirement funds of the employees. For these pension plans, the timing of cash flows is important as the benefits need to be provided at specific times. These plans will generally have a long time horizon and will have high risk tolerance.

Related Downloads

Learn the skills required to excel in data science and data analytics covering R, Python, machine learning, and AI.

Free Guides - Getting Started with R and Python

Enter your name and email address below and we will email you the guides for R programming and Python.

Saylient AI Logo

Take the Next Step in Your Data Career

Join our membership for lifetime unlimited access to all our data analytics and data science learning content and resources.