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Definition of 'Funds Management': Collective Investment Schemes
Definition of 'Funds Management': Collective Investment Schemes
The management of the cashflow of a financial institution. The funds manager ensures that the maturity schedules of the deposits coincide with the demand for loans. To do this, the manager looks at both the liabilities and the assets which influence the banks ability to issue credit. A fund manager must also pay close attention to cost and risk in order to really capitalize on the cash flow opportunities. A financial institution runs on the ability to offer credit to customers. Ensuring the proper liquidity of the funds is a crucial aspect of the fund managers position. Funds management can also refer to the management of fund assets.
Identify your goal (these should be realistic) Establish a time frame Identify your level of risk based on your current responsibilities Understand the volatility of return associated with different investment types
Shares
Usually identified as having the potential for the highest return of all the investment classes, but with a higher level of risk i.e. share investments have the most volatile returns over the short term. An investment of this type of asset should be based on the investors' objectives but it is recommended that it be viewed on a medium to long-term horizon e.g. over five years.
Property
Property yields are normally stable and predictable as they comprise many contractual leases, the rentals of which are passed through to investors. Property share prices however fluctuate with supply and demand and are counter cyclical to the interest rate cycle. Property is an excellent inflation hedge as rentals escalate with inflation, ensuring distribution growth, and property values escalate with inflation ensuring net asset value growth.
Bonds
Bonds generally have a lower risk than shares because the holder of a bond has the security of knowing that they will be repaid in full by government authorities. Corporate bonds can also be included and have a slightly higher risk than government-issued bonds. An investment in this type of asset should be viewed with a 3 to 6 year horizon.
Cash
Cash is generally regarded as the safest investment. Whilst it is theoretically possible to make a capital loss investing in cash due to the effects of inflation etc., it is highly unlikely. Due to its stable nature, cash has a relatively low return in comparison to the other investment classes. An investment in this type of asset may be viewed with a horizon less than 3 years.
Equity Portfolios
These portfolios invest in selected shares across all the industry sectors of the Nairobi Stock Exchange and offer medium to long-term capital growth as their primary investment objective.
Balanced Portfolios
Balanced portfolios invest in a wide spread of investments in the equity, bond, money markets and aim to provide capital appreciation together with interest income over the medium to long-term.