Funds Management 101
The Anson Funds management industry includes a variety of different entities, including fund administrators, depositaries, specialists, risk management consultants, and valuers. There are many different types of funds, and some are even governed by bespoke legislation. These include Regulations and European Venture Capital Funds, Social Entrepreneurship Funds, and European Long-term Investment (ELFI) funds. A fund manager’s job is to oversee the overall performance of the portfolio.
Important Tips to Manage Funds Effectively
While fund performance is often thought of as the acid test of fund management, it is actually the performance of the internal components of each fund that demonstrates the manager’s skill. Consequently, institutions often measure the performance of individual funds to evaluate their efficiency. To measure fund performance, these institutions hire outside firms to compile industry-wide data and compare each fund to specific peer groups and performance indices. This type of monitoring can be time-consuming, especially for those with little time to assess investments.
Asset allocation determines how much of a fund should be invested in a given asset class. Often, the percentage of the fund invested in each stock or bond depends on the investment strategy chosen by the manager. According to Markowitz’s theory of portfolio diversification, effective diversification requires managing correlations between asset and liability returns and addressing cross-correlations between returns. While many investors are able to find a suitable balance between stock returns and bond returns, not all funds will be successful.
The most important aspect of effective fund management is demonstrating an extensive pipeline of high-quality investments. LPs evaluate the fund’s ability to source deals, and the consistency of that with the investment thesis. Funds managers can demonstrate their experience through their portfolio, but developing a robust pipeline early in the process can be difficult. Moreover, they cannot make any capital commitments unless they have a pipeline. For this reason, they need to have an extensive pipeline before making any final decisions.