Investment management is the process of managing and administering investments on behalf of individuals, organisations, or institutions. It involves allocating capital (ie money and debt) into different assets (like shares, property or bonds) that will deliver a financial return for end investors while funding the activity that fuels our economy.

Investment management clients can be other companies, governments, insurance agencies, superannuation funds, not-for-profit organisations, family offices or individuals. Anyone who has money to invest is a potential client of an investment management firm.

Also referred to as asset management or funds management, investment management is a fascinating and dynamic industry that has a major impact on society. It provides capital for businesses and major infrastructure projects, creates jobs and enables economic growth. For individuals, it helps build wealth and retirement savings. By investing responsibly, investment managers can also create a more equitable and sustainable future for all.

Key roles

Future IM/Pact is focused on front-office investing roles, which cover any position involved in recommending, making or implementing an investment decision. Here's a snapshot of the typical roles in most investment teams:

• Internship/Graduate. Years experience: 0
  Assists analysts and portfolio / investment managers by researching and analysing investment opportunities and preparing reports. Historically, investment management firms haven’t offered internships or graduate programs, preferring instead to recruit analysts with a few years of experience in a related field. However, this is becoming more common among asset owners (super funds).
• Analyst. Years experience: 2+
  Works with portfolio or investment managers to find and research investment opportunities, build the investment case and pitch ideas to the team for inclusion in the portfolio. Manages existing investment positions through ongoing analysis of asset, company and industry news, and market insights to inform steps to maximise investment returns.
• Portfolio manager. Years experience: 10+
  Responsible for making investment decisions and constructing the portfolio to meet target investment outcomes.
• Trader. Years experience: 5+
  Responsible for executing trades (eg buying, selling, shorting and hedging) in liquid markets like shares, currencies, commodities and bonds.
• Chief investment officer. Years experience: 20+
  Responsible for setting the fund's investment strategy, overseeing investment decisions, building and managing the team, and managing and meeting stakeholder expectations.

Key players in Australia’s investment management industry

The Australian funds management industry manages over $4.2 trillion in assets, mostly on behalf of ordinary working Australians whose superannuation contributions are pooled and then invested into a range of assets. The majority of investing is done by:

• Asset owners / Super funds - industry and retail (eg Cbus, HESTA, Aware, Colonial First State)
• Fund managers - boutique, local, global (eg Perpetual, Munro, Pinnacle, Schroders)
• Private equity and venture capital (eg Adamantem, Champ, PEP, One Ventures)
• Federal and State investment bodies (eg Victorian Funds Management Corporate, TCorp, Future Fund, QIC)
• Investment platforms (eg Netwealth)
• Private wealth advisers (eg Perpetual Private Wealth Advisers, LGT Crestone)
• Insurance companies (eg QBE, IAG)
• Endowments, not-for-profits and family offices (eg Tattarang)

These organisations are supported by a range of providers, including equities research houses that provide proprietary market insights (like Macquarie Securities and Jarden), investment consultants (eg Mercer) and trading desks that execute deals.

Future IM/Pact is supported by over 20 leading investment management firms. Find out more about our partners here.

Fund types

Investment managers operate a wide variety of funds and investment vehicles designed to meet their clients' needs. Here are some of the most common types:

• Mutual / managed funds: pool money from various investor groups and invest it in a diversified portfolio of securities, such as stocks, bonds or a combination of both.
• Exchange-Traded Funds (ETFs): ETFs are similar to managed funds; however, they can be traded on stock exchanges like individual stocks, whereas managed funds can only be purchased at the end of each trading day based on a calculated price (net asset value).
• Hedge funds: often only available to high-net-worth individuals and institutional investors, these funds use a range of investment strategies, such as leveraged investing, trading non-traditional assets or short selling, to generate above-average returns.
• Superannuation funds: invest the retirement savings of members in a wide range of asset classes to generate returns over the long term.
• Property funds: pools money from investors to invest in real estate assets such as office buildings, shopping centres, and residential properties.
• Infrastructure funds: invest in infrastructure assets such as roads, airports, bridges, and utilities.
• Private equity funds: use money from high-net-worth individuals and institutional investors to invest in private companies. Often, these companies are in distress or require restructuring, and the investment manager will acquire a significant ownership stake and work with owners to increase its value and generally sell or exit the investment in 5 years.
• Venture capital funds: pools money from investors to invest in start-up companies with high growth potential that typically can’t get traditional funding from banks.

Investment strategies

Australian fund managers deploy a variety of investment strategies across different asset classes to achieve their investment objectives. Here are some of the most common investment strategies:

1. Active management: This strategy involves actively selecting and managing investments with the aim of outperforming a specific benchmark or market index. Fund managers conduct in-depth research analysis and often make frequent portfolio adjustments to capitalize on market opportunities.

2. Passive management: Also known as index investing, this strategy aims to replicate the performance of a specific market index rather than trying to outperform it. Fund managers construct portfolios to match the composition of the index, providing investors with broad market exposure.

3. Value: This strategy involves identifying undervalued securities with the expectation that their prices will rise over time. Fund managers search for companies or assets trading below their intrinsic value and make investment decisions based on a thorough analysis of financial statements, market trends, and industry prospects.

4. Growth: This strategy focuses on investing in companies or assets expected to experience above-average growth rates. Fund managers seek out businesses with strong earnings potential, expanding markets, innovative products, or disruptive technologies and allocate capital accordingly.

5. Income: This strategy aims to generate a steady stream of income for investors. Fund managers typically invest in assets such as bonds, dividend-paying stocks, real estate investment trusts (REITs), and other income-generating securities to provide regular cash flow.

6. Multi-Asset: This strategy involves investing across various asset classes, such as equities, bonds, commodities, and alternative investments. Fund managers aim to diversify portfolios to reduce risk and potentially enhance returns by taking advantage of different market conditions.

7. Sector-Specific: Fund managers may specialize in specific sectors such as technology, healthcare, energy, or finance. By focusing on a particular industry or sector, they aim to gain expertise and generate alpha by identifying investment opportunities within their chosen domain.

8. Quantitative: This strategy relies on mathematical models and statistical analysis to make investment decisions. Fund managers use algorithms and data-driven techniques to identify market patterns, trends, and anomalies, enabling them to make systematic investment choices.

9. Impact: This strategy combines financial returns with positive social or environmental outcomes. Fund managers invest in companies or projects that align with specific social or environmental goals, such as renewable energy, clean technology, education, or healthcare.

10. Alternatives: Fund managers may allocate a portion of their portfolios to alternative asset classes such as private equity, venture capital, hedge funds, real estate, infrastructure, or commodities. These investments often have a low correlation with traditional asset classes and offer potential diversification and unique risk-return profiles.

It's important to note that fund managers may combine multiple strategies or adapt their approaches based on market conditions, investor preferences, and the specific objectives of the fund or mandate they manage. Meeting with different investors to understand the nuanced differences and the work involved is important for determining which type of investor you might want to become.

What to study for a career in investment management

There are several university degrees that are relevant to a career in investment management. Some are more common, like commerce, maths, finance economics or business studies, while a growing number of fund managers want people from diverse backgrounds, such as engineering, data science, physics and the arts. Combined degrees and Masters are also increasingly sought after with an expectation you’re among the top of your class. Completing your CFA (Chartered Financial Analyst) exams is another option.

The common factor for any study is that you gain an understanding and interest in markets and skills in critical thinking and financial modelling. The master skill, above all, is being highly curious. Here, we segment the three types of qualifications that those working in investment management have typically undertaken.

• Traditional: These are the degrees that until recently have been the most common: Commerce, Business, Economics, Master of Applied Finance and the CFA (Chartered Financial Analyst) program.
• Emerging: Over the past few years, artificial intelligence (AI) and machine learning have become hot topics in investment management as investors look to integrate the power of technology to model investment opportunities and generate insights. That’s why funds are increasingly hiring people who have come from data science, computer science and engineering degrees.
• Unconventional: The sky is really the limit in terms of degrees people have completed who are now working in investment management. At Future IM/Pact, we’ve worked with people with backgrounds in the arts, psychology and even zoology! As long as you can demonstrate your skills in numeracy, critical thinking, and a passion for markets, don’t let a lack of a finance degree stop you from exploring investment management.

How to set yourself up for a career in investment management

Starting a career in investment management takes time and a passion for learning. Traditionally, front-office investing roles required at least 2 years of work experience; however, many firms are now offering internships and graduate programs to attract the brightest young minds in the country. Here are a few things you can do to best position yourself for a career in investment management:

• Blitz your degree: Investment firms are looking for the best and brightest minds to join their teams. Put the work in at university and top those marks!
• Take the CFA course: Completing the Chartered Financial Analyst (CFA) exams will build your knowledge and practical skills and show a commitment to learning.
• Start your own portfolio: There is no better way to learn about investing than by creating and managing your own portfolio. Read this article to find out how.
• Stay informed: Read investment publications and blogs to stay up to date with global markets and trends, such as The Australian Financial Review, Bloomberg Australia, Livewire Markets and Morningstar Australia.
• Follow investor influencers: Balance out your social media feed with people who understand and comment on markets, such as Peter Switzer (@peterswitzer), Scott Phillips (@TMFScottP), Gemma Dale (@gemma_dale) and Roger Montgomery (@rogermontgomery).
• Get an internship: Investment management internships don’t come up that often, but they are becoming more common. Securing a paid or unpaid internship with an investment firm is a great way to learn about professional investing from the inside and build valuable contacts.
• Join a finance uni club: University clubs and societies are a great way to connect with other students interested in investment management and network with investment firms that engage with these clubs. We partner with several societies, including the University Network of Investment and Trading (UNIT) and Melbourne University's Banking on Women, who have a great relationship with industry and offer its members regular networking, learning and job opportunities.
• Read books and listen to podcasts: There are many books and podcast episodes about investing out there, but it is well worth reading some of the classics to give you a solid understanding of the industry, such as The Intelligent Investor by Benjamin Graham. Here's a list of great books and podcasts about investing.
• Participate in investment competitions: Many firms and universities run investment competitions for students that provide exposure to and practical application of investing scenarios. Future IM/Pact runs an annual Investment Competition which awards winners paid internships at leading investment firms in Australia, such as Schroders, Cbus, HESTA, QIC, Mercer, Munro, and TDM.
• Build a network: Build relationships with people in the investment management industry, such as mentors and business leaders. Be proactive at networking events and introduce yourself to the speaker or industry representatives.
• Join Future IM/Pact: Attend our events, participate in the Investment Competition, subscribe to our newsletter and take advantage of the unparalleled access we can provide to industry leaders, professional development experiences, internships and job opportunities. Join us today!

What makes a great investor?

Investors solve complex problems in an unpredictable and rapidly changing environment. That means you need to be highly analytical and also intuitive. You need to be able to see the big picture and also immerse yourself in detail. Being a team player is critical, but you need to make the calls as you get more senior. Determination, grit and humility will set you apart. Here are a few key qualities that make a great investment manager:

• Strong analytical skills: Analysing and interpreting financial data is a core component of the job. Being able to see trajectories and potential market effects is key to making well-informed investment decisions.
• Ability to manage risk: Balancing the risks and rewards of an investment and managing risk appropriately is key for any investor. They must be able to diversify their clients' portfolios to minimize risk and maximize returns.
• Strong communication skills: No one likes radio silence, especially when large sums of money are at stake! Investors must keep clients informed about their investments and clearly communicate the rationale behind any decisions.
• Confidence and conviction: Sometimes investment decisions are unpopular or appear risky, so a good investor must have confidence and belief in their abilities and analysis to uphold their recommendation. On the flip side, they also require humility and the ability to own up when they get things wrong.
• Flexibility and adaptability: Market conditions are constantly changing, so investors must stay updated with the latest trends and modify their investment strategies accordingly.
• Ethics and integrity: Hollywood has given investment managers a bad rap. Movies like Wolf of Wall St depict investors as unscrupulous and egotistical; however, most real-life investors have strong ethics and integrity, acting in the best interests of their clients.

Is investment management a good career for women?

Investment management is a fascinating and rewarding career path for women. It involves using analytical and problem-solving skills to help clients achieve their financial goals and significantly impact the economy and society. Women also make great investors, with research showing that female-led investment teams consistently outperform their male counterparts.

The way women make decisions is core to their success in investment management. Generally, women take more time to explore opportunities and gather information. They seek out different opinions and viewpoints and are open to advice and collaboration. They are more cautious, focusing on risk management and holding assets longer. These attributes have assured their success in navigating and outpacing down markets for the past 20-plus years.

Do many women work in front-office investing in Australia?

Investment management is traditionally a very male-dominated industry, however the rates of female representation are starting to increase. The 2022 Financial Services Council (FSC) Diversity Survey canvassed 20 global and domestic fund managers and found women make up, on average, 27% of investment management teams, a 2% increase from the year before. However, when we drill down to the key decision-making roles within these teams, women account for just 10%.

Encouraging and enabling young women to pursue a career in investment management is part of our mission at Future IM/Pact, and we have helped place many exceptional female interns, graduates, and junior analysts across the industry. We are also passionate about helping female investors already working in the industry to accelerate their careers and fulfil their leadership potential through our sponsorship and advocacy programs.

Why do we need more women in investment management?

At Future IM/Pact we are passionate about increasing gender diversity across funds management, and there are so many compelling and evidence-backed reasons to do so, including:

• Different perspectives: Having a diverse group of individuals in any industry brings a variety of perspectives and experiences to the table. McKinsey research shows how diversity of thought in business leads to more informed and balanced decision-making. Women bring unique insights and approaches to investing that enhance decision-making and drive better outcomes.
• Improved performance: Studies have shown that companies with more gender-diverse teams tend to perform better financially. A recent study found companies with more women in senior management teams have about 30 per cent higher profit margins than those with lower gender diversity.
• Fosters collaboration and innovation: Women generally seek out different opinions and viewpoints when making a decision and are open to advice and collaboration. By seeking and sharing ideas, women can spark new ways of thinking and drive innovation.
• Investor demand: Institutional and individual investors are increasingly demanding their fund managers invest in companies with more balanced gender diversity. Superfund HESTA surveys all partners on gender composition every two years, and asset consultant Mercer has set a goal of achieving 30% of women in key management decisions across the investment strategies it rates by 2030.
• Supporting gender equality: The funds management industry has historically been male-dominated, predominantly white and privately educated. The 2016 Mercer Women in Investment Report, led by Future IM/Pact Founder Yolanda Beattie, highlighted how endemic this reality was in Australia and became the catalyst for creating the Future IM/Pact initiative to tackle the lack of gender diversity across the industry. We’re making progress, but there is still a long way to go.
• Addressing the gender pay gap: Like many industries, there is still a significant gender pay gap in funds management, with women earning less than men on average. By increasing the number of women in the industry and supporting their career growth, we can help to address this disparity.

For a great read on why the investment management industry needs more gender diversity and how to tackle these complex issues, read our Women in Investment Management White Paper.