Investment Banking and Dealing with Funds

Having an enough capital when you start a business acts as a cushion to take in any kind of financial blow that your business journey might give you. Having a well-planned investment and financial portfolio always keeps you ready for any kind of set back and gives you a buffer to bounce back stronger. For this, you can rely on the investment banking system where the investment bank helps their clients by advising them on correct type of investments. These investments can be of any types, such as shares, bonds, property etc. However, it is important to note that investment banking is a sector that is volatile, which means any thing can happen any time. Although the returns on investment are better than the other two (asset management and wealth management), the risks involved with them are also quite big. Therefore, it is important that you choose your investment bank carefully, one that has a good reputation. Talking about reputation, big businesses have an unspoken responsibility upon them, to give back to the society who they have earned from. This is known as CSR. In this, the money goes out of the business, for welfare of people outside the organization. But there is also something known as the ESG funds that decide the credibility of any business. ESG funds are the Environmental Governance Funds which a company spends on the welfare of people working for them and on the health of the organization. They are equities or bonds. These funds surely give the firm a long-term advantage. So, if you are a corporate or an HNI, it would not be totally inappropriate to invest in ESG funds. Rather, they are bound to increase and enhance the credibility of the company. Talk to your investment banker regarding the same. They will provide you will proper guidance for the same.

What It Takes to Be A Part If Investment Banking!

Investment banking is sure a very glamorous looking career for anybody who is interested and has a knack for finance, numbers, and strategy. But there are some pre-requisites that one may have to consider before getting into the field. First of all, to get a job at one of the topmost investment banking firms in India, one has to have a degree in finance. This can range from a specialization in finance in BBA, or an undergraduate degree in finance and accounts. A person with a degree in economics also qualifies to land a job in one of the investment banking firms in India. However, it is crucial to remember, that along with these academic qualifications, it is also necessary that the individual manages to handle the pressure that the job role is going to bring on to them. Since they will be handling money, and that to in huge numbers, there is always going to be an invisible sword hanging on their heads. They must be available on calls all the time for their clients. When it comes to money, any body would be speculative and concerned. The said investment banker should be able to keep calm for himself and should also be able to assure their client about their finance status. Investment banking firms also deal with hedge funds, asset management and wealth management as well. However, these fields are not as hectic and as risky as investment banking. For someone who loves and is quick to grasp numbers, study them in such a way to anticipate their position in the future, it becomes quite interesting. In investment banking, the numbers can be volatile. The investment banker should be able to gauge the upcoming financial trends of the market and take decisions for their clients or guide them accordingly.

The Role of Asset Management Companies in India

For a business to keep growing, there are many things that become important for this to happen. While choosing the type of work and clients plays a big role in the funds that a company gets, it is also important to see how these funds are managed by the entrepreneur. For any business owner to take bigger and risky decisions, they need to have a good amount of backup of funds in their kitty. Hence, investing the money and the profits wisely is important and vital for the business to run without much of risk. Now, we cannot expect every entrepreneur to know literally everything about investment. Therefore, they might have to turn to any of the asset management companies in India for help. These companies ideally, study the profile of the business. In this they see what the existing assets of the company are, what the liabilities are, how what can be done for the investments to become better and so on. Then, they sit with the client and in a way chalk out their entire financial plan in terms of financial goals. This can include investment in various assets such as shares, bonds, property, long short fund (a type of mutual fund), and if the business is financially strong, then maybe investment in some other business as well. The asset manager explains the benefits and risks (if any) of every investment and then concludes by giving the investor the best options. Many times, these decisions are taken by the asset manager itself. If their client is unavailable, they can take the decision on their behalf and buy or sell the fund if needed. Therefore, this brings us to a point where we stress on the importance of choosing your asset management company wisely. It is a huge amount of your hard-earned money that we are talking about.

How Is Wealth Management Different Form Investment Banking?

When we start a firm of our own, one of the main and primary goals that we have for our company is wealth expansion. This wealth expansion should not be confused with the bank balance that a person has in their bank. This wealth is defined by the number of assets in any form that you may have, and this could also include yours or your business’s credibility. For this, as an entrepreneur, having some basic understanding about wealth management is very important. Of course, it would be unfair to expect from y our to know everything, having some basic knowledge is good. This is so that you know when to invest in what kind of wealth and asset and when to withdraw anything from in. you could also hire an asset management company for your business. When you go to an asset management company, they first hire an asset manager. This asset manager then talks to you or your partners in business (if any), gets to know what kind of service or product you provide, studies the kind of financial profile you already have and then ultimately, with your help chalks out an entire plan of action to expand your wealth. This wealth could be in the form of some bonds or shares or some property. It need not always be hard cash. If you go to any of the investment banking firms in India, you will notice that there is a vast difference between the work nature of wealth management and investment banking. Investment banking is more volatile, and an investment banker is needed to be equipped with information about the gains and losses in the market all the time. Where as a wealth manager can be a little relaxed int eh term. Of course, he will too have to be well informed about the kind of trends that are going on in the market, but the profit or huge losses of a customer foes not totally depend on his or her decision. 

The Big Wide World of Financial Institutions

When we talk about the financial world, there are so many roles and responsibilities that are played by different individuals and financial businesses. For example, if you go to any of the wealth management firms, you will see that they have a specific set of duties to carry out. First, they must place the needs and aspirations of their clients first and make it a point that their financial portfolio is expanding. Plus, the wealth manager also helps them to know that what kind of profit will the incur from what kind of asset. For example, there are some assets that do not give us profit immediately or even in a year. They might start showing you some profit (like mutual funds) after like three years or so. Then there are also some assets that can give you quicker and better returns. So, the wealth manager helps you to understand how to maintain a balance while investing in any of the long term or short-term ones. Plus, there is also a necessity in understanding that these financial institutes that we talk about also help the businesses carry out the hedge fund process and a lot more. Now it totally depends on the entrepreneur or the business owner as to what kind of plans they want to get into. If they want to want to get easier and quicker returns, then they might as well go to an investment banker. If they are not so keen on getting quick returns and want to invest in something safe, then asset and wealth management firms are always going to be there to help them. For all this to happen, you need to ensure that there is some enough profit that is flowing in and that it is consistent in every quarter. 

How and Why Should One Invest in Hedge Funds?

Even with the investment banking industry India booming, hedge funds are one form of investment that are looked upon as too risky. Before you form any opinions, it is extremely necessary to understand exactly what they are, how they function and who should invest in them.

Hedge funds are private investments made with pooled funds that aim towards earning a continuous return for the investor. These generally involve massive funds and a lock down period of at least one year. While investing in hedge funds, one can pool money into the national as well as international markets. However, since they involve investment of a large sum of money, they are accessible to only a certain set of accredited investors.

Hedge funds are generally created for a specific market opportunity and therefore require the use of specific investment banking strategies. These strategies are formulated keeping in mind the objective of investment, market attractiveness, and the financial environment. They directly help in determining the amount of risk involved in investing. While some strategies are not as risky, others are. Therefore, it is extremely crucial to derive them carefully.

Unlike mutual funds, not everyone can invest in hedge funds. There is a specific guideline that one must fulfil in order to be considered eligible for investing in them. Firstly, it is mandatory that one has a net worth of $1 million or more, while having an income exceeding $200,000 for two consecutive years. Further, unlike mutual funds, investment in hedge funds is not limited to stocks and bonds. One can choose to invest in bonds, stocks, land, currencies, etc., both domestically and overseas.

Once you have decided that you are willing to invest in hedge funds, it is advised that you go through a detailed assessment process. This will help you find the hedge fund that suits you well and at the same time offers the least possible amount of risk. The most important tool that comes in handy while assessing hedge funds is the World Government Bond Index (WGBI).  It allows you to compare annual return rates and calculate deviations. Further, other aspects that can affect your choice are the size of the firm that you are choosing to invest in, its track record, the minimum investment required and redemption terms of the fund all together.

Considering that hedge funds give higher returns and are bound by fewer regulations than mutual funds, asset management companies in India believe that the country has a lot of potential of getting international funding for domestic funds. Increasing purchasing power and the Indian instinct to save has resulted in a booming hedge fund market. Early entrants of the market have earned substantial revenue and have predicted that the market would only grow.

Investing in hedge funds has its pros and cons. It is important to not get misguided by bias and invest in plans that work for you and your business.

Roles of an Asset Management Company

When we think of an asset management company, the first thing that comes to mind is- what does it do and how is its role different from managing your own assets? An asset management company is an organisation that collectively invests its clients’ funds into assets like bonds, stocks, hedge funds, property, partnerships, etc. It examines all financial lawsuits, creditors, court judgements and investment opportunities for its clients.

On the other hand, managing your own assets might involve similar tasks, but it can often have a smaller scope, lack expertise and thereby have a higher risk of error.

An asset management company has various roles that it takes care of simultaneously. One of its most important jobs is to extract data, translate it and use it while making any investments. Further, it develops detailed processes, procedures and policies that act as rubrics for the kind of projects its clients choose to invest in. It is essential for the company to understand the requirements of the brands it works for, as the solutions to all their problems can be varied. In addition to all of this, asset management companies must maintain a good database that records trends which have previously prevailed in the market. This helps them forecast the changes that may occur in the financial environment in the coming future.

It has been noticed that asset management as a function is often handled by full-service investment banking firms in India. This is because such a situation allows centralised management of funds and gives the client the power to have a holistic view of their monetary standing. It also ensures that all functions sync towards a common goal and the brand has a single investment plan instead of having several smaller ones. Such a scenario eliminates duplication of research and cuts down on costs, making the whole process even more effective.