An Investment Firm can be defined as a financial institution that sells shares to private individuals and invests or puts money in securities issued by other companies. By investing money on behalf of their shareholders, the Investment Firms are liable to their profits and losses. They are also known as Investment Companies and are closely related to the concept of Investment Banks. Investment Banks help private agencies and the government to raise money by issuing and selling securities in the primary market. They assist the public and private corporations in raising funds from the capital market with the help of both equities and debts. Investment banks also offer valuable advice on mergers, acquisitions of companies and other financial transactions.
United States Securities and the Securities and Exchange Commission (SEC) law define three types of investment firms:
Mutual Funds,
Unit Investment Trusts (UIT), and,
Closed-end Funds
Mutual fund companies specialize in mutual funds, which are a collective pool of investment, which brings in money from various investors, and invest them in stocks, bonds, money market instruments and securities. There can be varied classes of mutual funds such as equity funds, open-end funds, hedge funds and money market funds. Mutual fund companies are types of investment companies where fund mangers trade in the firm’s underlying securities realizing investment profits and dividends or corresponding losses. These investment proceeds are passed on to the individuals as their Net Asset Value of a share of a Mutual Fund. It should be noted in this context that Mutual Funds are known as Managed Funds in Australia. Closed-end Funds also mean a collective pool of investment but with a limited number of shares, which cannot be created on the fly or redeemed until the fund liquidates. Unlike the mutual fund companies, the UIT is a US investment company having a fixed portfolio of securities and are created for a specific period of time. UIT’s, mainly assembled by a sponsor and sold through brokers to potential investors, have a fixed number of portfolio meaning that new ones will not be bought or old ones sold with the event only restricted to exigencies such as bankruptcies or mergers.
The Investment Company Institute (ICI), one of the key investment analysts in the USA states that among the investment companies, mutual fund companies are making steady profits as total investment in mutual funds or the combined assets of the USA’s mutual funds increased by 0.4% to $ 10.608 trillion as in February 2007.
Examples of Investment Firms in India are:
Peerless Finance and Investment Company
Cholamandalam DBS Financial Services Group; Cholamandalam DBS Finance Limited (CDFL), DBS Cholamandalam Asset Management Company (DCAMC), DBS Cholamandalam Distribution Limited (DCDL) and DBS Cholamandalam Securities Limited (DC Sec)
Examples from the USA would include:
Ray W Nettleton LLC
Newman Capital Group
Gary Lee Partners
Charles Schwab & Co.
Grotech Capital Group
Lucas Capital Management LLC
Lastly, Investment Companies such as JP Morgan, Merrill Lynch and ING Investments are renowned all over the world.