There are different types of investments in the United Kingdom to meet the most varied needs of investors. From stocks and shares to short-term investments such as high-yield savings accounts, government bonds and certificates of deposit. And then again ISAs or SIPPs, derivatives but also Hedge Funds, just to name a few.
Given the large variety of investment vehicles, within this article we will try to learn more about the macro-areas of investment and we will also try to explain the meaning of hedge funds in simple words as a range of possible investments in the British financial landscape.
How the financial market is structured in the UK
Financial market in UK is divided into three macro areas: Fund Management, Private Wealth Management and Banking. Each of these sections in turn has subsections with the relevant action specifications for each investment sector.
- Fund Management
Funds management is the overseeing and handling of a financial institution's cash flow. The fund manager ensures that the maturity schedules of the deposits coincide with the demand for loans. To do this, the manager looks at both the liabilities and the assets that influence the bank's ability to issue credit.
There is a particular keen eye on them, which are regulated in the UK by the Financial Services and Markets Act 2000 (FSMA), various statutory instruments made under the FSMA and the Financial Conduct Authority's (FCA) rules.
- Private Wealth Management
The UK is one of the largest centres all over the world for onshore investment of private wealth. The reason belongs to the favourable legal and regulatory environment that allow this kind of investment. This investment advisory practice incorporates financial planning, portfolio management, and other aggregated financial services for individuals, as opposed to corporations, trusts, funds, or other institutional investors.
From the client's perspective, private wealth management is the practice of solving or enhancing their financial situation and achieving short-, medium-, and long-term financial goals with the help of a financial adviser. From the financial adviser's perspective, private wealth management is the practice of delivering a full range of financial products and services to clients, so that those clients can achieve specific financial goals.
Traditionally, UK banks offered a higher return on capital than most other advanced economies - not a coincidence if UK has the second largest banking deposit in the world after the USA. Banking markets is divided onto other 4 sections: International Banking, Retail Banking, Private Banking and Islamic Finance.
Then there are the Investment Products. Securities, derivatives, hedge funds, Insurance - the largest industry in Europe - then General insurance, The London Market, Private Equity and Venture Capital.
A derivative contract is a relevant contract which is treated for accounting purposes as a derivative financial instrument. This means that has a value that changes in response to a change in an underlying variable. Derivatives are commonly traded on exchanges or OTC and are purchased through brokerages.As mentioned at the beginning of our article, we will now try to dispel some myths about hedge funds by going to know them in detail with a focus dedicated to them.
- What is a hedge fund
A hedge fund is a type of investment that is actually available exclusively to advanced investors, such as institutions and individuals with important individual assets to invest and which aims to obtain a high return on the investment made.
These funds are in fact an alternative type of investment that is managed more actively than others and differs in investment strategies that can sometimes be defined as risky. In fact, the figure of the broker is essential in these types of investments.