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A Comprehensive Guide to Fund Management: Objectives and Benefits

Updated: Jan 22

Table of Content:

  • Introduction

  • Understanding Fund Management

  • Key Objectives of Fund Management

  • How Fund Managers Operate

  • Types of Fund Management

  • Active vs. Passive Funds: Unveiling the Core Distinctions Simplified

  • The Importance of Fund Management

  • Advantages of Fund Management

  • Choosing a Reliable Fund Manager

  • conclusion

Fund Management


Fund management, sometimes referred to as asset management, is a crucial aspect of the financial industry. It involves overseeing and handling financial assets on behalf of individuals or institutional investors.

This guide aims to provide a comprehensive overview of fund management, its objectives, and the benefits it offers to investors. Whether you're a mutual fund advisor or an individual investor, understanding the intricacies of fund management is essential for informed decision-making.

Understanding Fund Management

Fund management is a process in which a fund manager operates, deploys, maintains, upgrades, and disposes of assets in a cost-effective manner while ensuring optimum return on investment.

Fund managers play a crucial role in maintaining the proper liquidity of the funds to meet any upcoming obligations. They must pay close attention to the return, cost, and risk associated with potential investment opportunities.

Key Objectives of Fund Management

The primary objective of fund management is to manage investments on behalf of investors. However, it encompasses several other objectives as well.

  • Long-term Capital Appreciation: A key goal of fund management is to ensure the long-term capital appreciation of investments. By selecting and managing profitable investments, fund managers aim to grow the investor's initial capital over time.

  • Safety and Stability: Fund managers aim to provide the highest level of safety and stability to investors. They focus on investment opportunities that offer the right balance of risk and return.

  • Regular Cash Flow: Apart from appreciating the capital, another objective is to generate regular cash flow through interest and dividend income from the investments.

How Fund Managers Operate

Fund managers are tasked with the selection of appropriate investment strategies for the investors and the management of their portfolios. They monitor the market, ongoing economic trends, and available investment opportunities to make informed investment decisions.

Fund managers often follow disciplined investment systems that eliminate emotion from investing. They set out specific reasons to buy or sell shares and adapt their strategies based on market changes.

Types of Fund Management

Fund management can be classified into different types based on the investment:

  • Mutual Fund: This type of fund management involves pooling investments from multiple investors to purchase securities.

  • Pension Fund: Pension funds are designed to generate income for investors post-retirement.

  • Trust Fund: These are estate planning tools that maintain investment assets under a trust managed by a neutral third party.

  • Hedge Fund: Hedge funds use complex trading and risk management techniques to trade in relatively liquid assets.

Active vs. Passive Funds: Simplifying the Approaches to Fund Management

Active Funds


Outperform market index (e.g., Nifty, Sensex) and generate alpha

Management Approach

Actively managed by professionals

Investment Strategy

Research, analysis, and dynamic portfolio adjustments


Higher fees due to active management and associated costs


Open-ended funds, closed-ended funds, interval funds

Key Considerations

Requires outperformance of market and index to justify fees

Passive Funds


Match the performance of a specific market index

Management Approach

Passively replicate index composition

Investment Strategy

Diversified portfolio mirroring index constituents


Lower fees compared to active funds


Index funds, Index ETFs

Key Considerations

Low-cost, tracking error minimization is key challenge

The Importance of Fund Management

Fund management plays a significant role in achieving investment goals. It ensures proper asset allocation to match the long-term and short-term goals of the investors. Fund managers also focus on diversifying the investments to reduce the overall portfolio risks while maintaining the desired potential return.

Moreover, tracking fund performance is an integral part of fund management. It ensures that investment strategies are adjusted to achieve the goals of investors and the fund as a whole.

Advantages of Fund Management

Fund management offers several benefits:

  • Access to Diversified Portfolio: It provides investors with access to a diversified portfolio comprising investments in various sectors through different asset classes.

  • Wealth Creation: It facilitates wealth creation over time with the right mix of risk and return.

  • Regular Cash Flow: It generates regular cash flow through interest and dividend income on the investments.

Choosing a Reliable Fund Manager

Choosing a reliable and experienced fund manager is crucial in fund management. Investors should consider factors such as industry experience, past performance of the funds managed by them, and rankings by credible bodies. Performing a thorough check and doing the necessary research on the fund managers is vital before opting for a mutual fund.

In conclusion, fund management is an essential aspect of the financial sector that aids in achieving investment goals. Understanding its objectives and benefits can help mutual fund advisors guide their clients in the best way possible and individual investors make informed decisions.

AssetPlus stands as the pinnacle choice for those aspiring to become efficient fund managers and independent Mutual Fund Distributors (MFDs). Through its unparalleled features, including industry-leading commissions, paperless KYC processing, expert training, and NISM certification opportunities, AssetPlus provides a comprehensive platform that equips professionals with the tools needed to excel in the dynamic landscape of Mutual Fund Distribution. With a commitment to efficiency, transparency, and growth, AssetPlus emerges as the ideal partner for individuals looking to navigate the complexities of the financial industry and build successful careers as independent MFDs.

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