What is Portfolio Management

Different meaning for
Company Individual

To get an clear understanding, we need see the different meaning of Portfolio and different type of users or groups as for Individuals portfolio definition is different and for companies it’s different.

Definition for portfolio for individual:

The collection of a wide range of financial assets that are owned by stakeholder or an investors. Examples: Market Stocks, Funds, Properties (Industrial, Commercial and Residential), cash equivalents, bonds, etc.

Example: Miss Michelle, Saved 100K from sale of a property. First of all this 100 thousand dollars is been categorized as an Cash Fund and now she want to split her funds in different portfolios. To do so, she invested the cash funds into 5 different channels:

Market Stock 10%
Gold 10%
Property (residential) 60%
Bonds 10%
Fixed deposit – Funds 10%

So she has invested 60% in Property portfolio, and rest of the 40% (10% each) in the other portfolios and created different range of financial assets.

Further to clarification, each of the mentioned earlier category or portfolio’s have sub-categories e.g. Market Stock is an Investment Portfolio, under this category we have shares from different companies and same goes with fixed deposit as each the FD provide different returns and benefits.

Portfolio Management for Company/Organization/Firm

For Company or corporates Portfolio Management is the collection of projects and program to control and delivery of company strategic priorities/goals.

The primary goal of an Portfolio Mgmt. in Company is to balance the implementation of change initiatives, optimizing return on investment and ensuring operations of the company.

To elaborate lets take this from a scenario.

A dairy (Milk Manufacturer) company is making a good profit and expanding each year, for continuous growth for their company owners and investors reinvest $ within the company, and each year with their executive team they prepare a budgets and make strategies for consistent growth of the company. Because in the past there are situations where study and data shows 1st quarter growth and rest of the year losses.

According to the strategic priorities they allocate funds to the high priority initiatives and combination of these prioritized initiatives creates program of work and combination of programs crates portfolio of work.

For example, after completing the budgeting exercise, in up-coming financial year, company has allocated 30mil dollars to invest in the strategic priorities. Suppose executive committee identified during the planning session, that they need to improve CRM, international sales, additional manufacturing unit, improve digital sales, IT security with IT Operations, employee engagement (skilled resource required), legal Risk and Compliance.

Now budgets has been allocated to the below departments to manage and deliver the key strategic initiatives under their portfolio:

Digital Security, IT Ops = Tech Refresh or Technology
Employee Engagement = HR
Legal, Risk & Compliance = Legal
CRM, International Sales = Sales
Manufacturing Unit = Manufacturing

Each if the department owners and GM who manages the department will ensure implementation of the program and projects under their Portfolio, report to the stakeholders on ROI, overall health, KPI, risk & issues and financial management..

Another point of consideration, this 30 Mil $ is a capital funding / investment for a company and Finance teams are involved to manage overall budget allocation and reporting FP&A.

Please feel free to DM or comment if you have any further questions related to portfolio management.

Thanks!

[email protected] or visit us at www.ajubatech.com