Investment management is the business of investing other people’s money. It is the “buy side” of the broader financial industry. Investment managers, sometimes called asset managers or money managers, put their clients’ money to work in common stocks (equities), bonds and other fixed-income securities, commodities, or a combination of any of these. Their clients may be companies, government agencies, nonprofit organizations, and individuals—in short, anyone who has money to invest.

The investment management industry (IM) manages hedge funds, mutual funds, private equity, venture capital, and other financial investments for third parties, which include companies, pension funds, endowments, insurance companies, private banks, nonprofits, and individuals. The IM industry is also known as the asset management industry. The competent management of hedge funds, mutual funds, and other financial investments provides financial security to Americans, allows companies to grow and prosper, and fuels the U.S. and world economies. The U.S. financial crisis of 2008–2009 and the COVID-19 pandemic underscore how important strong investment management is to the health of the U.S. and world economies.

Hedge funds are privately offered, professionally managed investment vehicles that seek, like all financial investments, a positive annual return, limited variations in value, and the preservation of capital. HedgeFundFacts reports that “hedge funds play a critical role in the financial markets, broadening the use of investment strategies, increasing the number of participating investors, and enlarging the pools of capital available.” According to alternatives data provider Preqin, hedge fund firms controlled more than $3.6 trillion in assets in 2019, according to Hedge Fund Research, up from only $1.5 trillion in managed assets in 2006.

Mutual funds are a group of financial assets (such as stocks) that are managed by a portfolio manager. The Investment Company I...