The constituents in the third category draw on arbitrage opportunities in global financial markets. These processes involve investing in congeneric financial securities in the same asset class with divergent prices, with a view that the prices of given securities will approximate and converge to one another, due to the fact that the essential sets of data that lie behind the price and dictate the price movements and direction of that security are identical. Hence, the price for those securities should converge within a given time horizon, rather than diverge and dissimilate.

The last category that the authors lay out do not necessarily appertain to a particular factor or systematic reasoning. These styles and strategies may incorporate constituents from different categories, they can shift the focus of the investment company, or the investment manager to a particular sector, region, country, or a systematic logic to position investment activities in an attempt to profit from them. The aim is to benefit from different types of opportunity sets with more flexibility than other categories. The systems and logic behind the investments in this category might be subject to refinements and readjustments based on the opportunity set, and the set of data that dictate the price of financial securities.

After the examination of a number of approaches to categorizing investment strategies, it can be asserted, that investment strategies tend to be classified based on the type of opportunities they address to. For example, arbitrage and relative value/convergence strategies tend to be deployed where there is a judgment by the investment company that there is a discrepancy or mispricing in one or several financial securities in the market. Event-driven strategies tend to be deployed when where is a judgment that a rare occurrence that can yield positive returns will happen. Equity-based/directional market strategies tend to be deployed by investment management companies when they look to benefit from the overall positive status of the economy, and they have a positive bias/judgment, in a sense that they think the financial securities they buy or sell will be appreciated or depreciated in accordance with their analysis and biases. Opportunistic, macro and hybrid strategies are deployed when there is a tendency towards diversification. Therefore, the type of opportunity that is being looked for is a factor affecting the investment strategy choice on its own.

The strategies abovementioned also differ in terms of the type of financial securities they address to, and the time period of their implementation. These concepts also manifest themselves as factors, as they directly impact the choice of strategies. The endeavor to allocate their clients' money into the right type of assets and into the right type of time horizon can also be specified as a factor playing a direct role in the process of selection of an investment strategy.

Investment companies are entitled to select their investment strategies at their will and as they see fit. In the second chapter, we will be looking closely at which type of strategies are used by investment management companies, but in this chapter, we can state, that even though some of the strategies are more common and utilized more frequently relative to others, there is no absolute dominant strategy amongst them. Investment companies tend to use a number of strategies due to the purpose of diversification, and the fact that there is no single strategy that encompasses all time horizons, all markets, situations and asset classes. Investment companies are completely entitled to specialize in particular areas in their investment activities and in their investment strategies. But, when we look at the usage of investment strategies by investment management firms, we see that the utilization of investment strategies tends to be diversified.

Figure 5. Breakdown of the selection of international investment strategies by investment management firms

Source: Taken from Capocci (2013: 51).

Lastly, we spoke about the definition of the concepts of risk and reward by Markowitz's studies. All securities in financial markets and investors tend to have different types of risk and reward. We will be discussing the riskiness of assets and providing numerical data as to the returns of different assets later in the second chapter, after we examine the practices of investment management companies in the field. In this chapter, we pointed out that Markowitz's studies laid a substantial emphasis on risk and reward and inferred that risk and reward are two main components of an investment. In this study, we underline the concept as a factor affecting the choice of an investment strategy.

We now have completed the theoretical review. We had a detailed look at the investment strategies, which are one of the core parts of this study. We have taken examples and definitions from some of the widely accepted studies, depicted them on charts and provided some supplementary data as to how they are broken down in terms of how frequently they used by investment companies within the industry, in an attempt to have a clear appreciation.

With this subchapter, we have now completed a bottom-up approach in our first chapter. We started off by defining the concept of investment and the management of it, we defined the participants and what they mainly do in the industry, and now we have shown what type of strategies they operate with, within the parameters of the industry. We are now moving onto the practical part of the study.

investment management international financial market

2. Approaches of Investment Management Companies to Investment Management in International Financial Markets: Cases of firms from the US

In the first chapter, we started off laying out the theoretical foundations of the concept of investment, and the investment management. We then moved onto defining the industry of investment management, and the companies that take part in the industry as entities and participants of global financial markets. We displayed the similarities and dissimilarities between investment management companies and how they operate. We also discoursed different styles and strategies employed by investment management companies, what they lay emphasis on, and what the reasoning behind them takes their roots from.

In this chapter, we will now examine real-life international investment management companies to confirm and disconfirm if the theoretical narrative in literature matches the practicality and applicability of the reality in the industry.

2.1 Industry Appraisal of International Investment Management: The Infrastructure and Operational Parameters in the Industry

2.2 Process of selection and implementation of investment strategies: Cases of Goldman Sachs Asset Management, Pacific Investment Management Company and BlackRock

We are now going to closely examine how these processes take place in the investment management universe by the major participants of the industry. We are going to take a look at the US born companies that now operate internationally all around the world, and then look for similarities and discrepancies in their approaches.

Goldman Sachs, founded in 1869, is a major group of international companies, which incorporates into itself an investment bank, an investment management firm, and a securities underwriting firm. They engage and serve their clients in investment banking, investment management, investment research, investment lending and underwriting, and other services.

Goldman's investment bank division largely deals with consulting and advisory services with M&A's, bankruptcies, spin-offs, split-ups, split-offs, separation and divestitures of business units and other types of corporate activities. The company handles the management of its own money and its clients' money in separate divisions. The Investment Management unit, also called as “Goldman Sachs Asset Management” works with institutional and individual clients worldwide, to provide a large selection of investment strategies and investment advices to implement in global financial markets, they also handle pension plans for corporations, large trusts, governments and central banks. However, banks own proprietary trading activities take place in another department.

Institutional Client department engages in short-term trading activities on their own and for their clients, and with their clients. The bank provides services on a broad range of asset classes including foreign currencies, all types of commodities, fixed-income products including mostly government, treasury, municipality and corporate bonds. In the investment and asset management part, the company carries out investment activities, largely based on global/macro, diverse and other various investment strategies; focusing on movements and possible directions of macroeconomic data affecting interest rate changes of the countries. They seek opportunities in both short-term related trading activities, and medium-to long-term investment activities.

Global investment research unit of the company that conducts research in asses classes across the board in global financial markets and provide support for trading and investment departments for decision-making purposes in their activities. Investment research consists of different layers of data-gathering and using the data to locate opportunities that would generate profits in financial markets. From the perspective of a top-down approach, for example, a way would be starting with the analysis of global macroeconomic data, drilling down into sectoral data and companies' fundamental financial data to define opportunities as to which firm in which sector would have more opportunity to outgrow their financials over their rivals and outperform in terms of their sales and revenues, generating more profits, and getting more capital appreciation by individual and institutional investors and have a higher share price.

Another aspect in investment research would be creating market views, future forecasts on the direction of the markets, sectors and companies; and providing investment advice based on those preparations. Complex financial and economic models and computational algorithms, highly quantitative methods are used in this part for different asset classes. For commodities, economic models are created, taking into account supply-and-demand statistics, political developments, weather data, and even global climate change data to post forecasts and advices on directions of the market price and possible future prices for the asset class. They also follow the developments in decision-maker organizations and government agencies such as ministries of economy/finance and central banks to have a bias on the directions of the macro- and micro-economic data.

Goldman Sachs' investment management division is responsible for management of clients' portfolios worldwide in global financial market, structuring, developing, delivering and deploying investment management strategies in clients' portfolios in an attempt to catch opportunities and generate positive returns on their clients' investments, exceeding benchmarks to get a more favorable perspective by their clients. Investment Management division consists of two major international departments, which are Goldman Sachs Asset Management and Goldman Sachs' Private Wealth Management departments.

Private Wealth Management (PWM) is responsible for managing business processes and allocation, reallocation, distribution and investment of the wealth of high net worth individuals and high net worth families worldwide. They mostly do not engage with corporate or institutional clients. They pinpoint and advice on the opportunities emerging in global financial markets that might yield positive returns on their investments to their clients. The most important mission in wealth management is preserving the already existing wealth and keeping it from capital depreciation through inflation, net loss due to foreign exchange currencies exposure and so forth, then comes increasing the wealth by investments through tactical asset allocations and executing these allocation strategies through deployment of capital strategically in financial markets globally.

Goldman Sachs Asset Management (GSAM), founded in 1989, on the other hand, is the department responsible for investment management globally for individual, corporate and institutional clients worldwide. The division is responsible for providing their clients with a variety of investment products that they can select with assistance, based on their characteristics of the investor profile. GSAM has more than 2000 investment managers, has 33 offices around the world.

GSAM, acting as an umbrella for many types of funds and investment products underneath, engages in research for pinpointing opportunities in financial markets, using valuation methods, strategies on forecasting growth and value, equity in many asset classes and securities. GSAM deploys quantitative methods and techniques with their investments, while constantly monitoring risk to protect the negative downside risk in their positions. GSAM contains in itself a bunch of different types of funds. As a house to a multitude of hedge funds in itself, it can offer different types of funds with different strategies deployed, on a range from global/macro strategies to distressed securities, focus on different regions or asset classes, or pure diversification. Consequently, GS, overall, cannot be limited to one single strategy, since they can afford to hold many funds in itself to deploy capital simultaneously through the preference of their investors and advice of the company to its investors, they are not restricted to refer to a meagre number of strategies, they are entitled to be flexible on the choice of their strategies in those terms.

Under the favor of the size of its worldwide infrastructure in all the large financial hubs in the world, Goldman Sachs Asset Management also serves other investment management companies, hedge funds, investment banks, family offices, institutional endowments, pensions, insurance companies and other types of financial market participants with prime brokerage services, furthering their activities and enabling them to take positions in a wide range of financial markets easily. They undertake consulting and advisory services for their clients worldwide, oversee and manage their risk and provide financial solutions in leverage, lending, debt, and so on.

Goldman Sachs Asset Management has a total of 18 ETFs, 99 open-end funds and 2 closed-end funds. Through ETFs and open-end funds that are open to be invested and traded to the public, GSAM offers investment opportunities and exposures in equities, bonds, commodities, real estate, short-term monetary commercial papers and alternative asset classes.

When it comes to equities, GSAM generates investment ideas are rooted in two main sources, fundamental equity research and quantitative investment strategies. The former one is done by research analysts in a way that is conducted bottom-up, monitoring and analyzing global and regional macroeconomic data and how the data affects the developed and emerging markets. Through the analyses, growth opportunities, value opportunities are found and invested in. The latter is consisted of advanced mathematical and computational methods and proprietary in house quantitative systematic approaches to reveal and benefit from investment opportunities.

Strategies in fixed-income class look to research and analyze markets that others tend to overlook to find opportunities that are not exploited yet. Both bottom-up and top-down research methods are applied in the process to locate and uncover relative discrepancies in pricing of securities.

To speak about alternative investments, GSAM also offers investment solutions and advisory services through the hedge funds, private equity firms and operates in the real estate sector as well. The company also has a sub-division called GSAM Credit Alternatives, which focuses on fundamental analysis. The idea here is to locate mispricing in capital structures of firms around the world to be able to benefit from arbitrage opportunities and event-driven openings to profit.

Lastly, GSAM also operates with a multi-asset class approach, implementing special and tactical asset allocation strategies between asset classes simultaneously and implements various investment strategies based on macroeconomic research, projections, and insights developed through fundamental and quantitative processes.

In the broadest sense, the process of generating ideas and the implementation of those ideas across financial markets and asset classes take place more or less the same way, even though there are slight some details to every asset type.

In their Alternative Investments, GSAM identifies 4 different investment strategies that they implement with their hedge funds, they are:

1) credit long/short,

2) tactical trading/macro,

3) multi manager/multi strategy,

4) seed capital.

Through the instrumentality of those hedge fund strategies, GS aspires after delivering positive returns that are not highly correlated to equity markets and the general dynamics of the world economy, also have less volatility than the overall market over longer-term time periods.

In credit long/short strategies, GSAM's approach starts with a fundamental analysis done in a bottom-up way in corporate credit market. The purpose is to locate and draw from discrepancies and inefficiencies in pricings of the assets. In parallel with the exploitation of market inefficiencies, the investment strategy looks to decrease downside risk using offsetting exposures through short-selling. Strategies in this direction aims at seeking where there is value. Meaning, that the potential upside return exceeds the downside risk by a large margin.

The same starting procedures of investment strategies where the portfolio managers conduct a fundamental research in order to conjure up investment ideas across financial markets and asset classes hold true in tactical trading/macro trading strategy. Company seeks to locate opportunity sets in investment universes running top-down, and bottom-up approaches, fundamental, technical and quantitative analysis with different factors on the table, in order to exploit and draw from macroeconomic developments, dynamics, trends and themes. These factors could range from duration of the investment activities, country of the investment activities focus on, sectors, subsectors or currencies in which the investments are to be denominated.

As for the Multi-Manager and Multi-Strategy approach, the company constantly conducts research and monitors the development of new trends and new dynamics in the universe of investment opportunity sets to keep one step ahead of the opportunities arising in developed and emerging markets to draw from them, timewise. Seed capital can be interpreted as another derivative of multi-manager strategy, which is to benefit from the studies, analyses and works of other hedge funds, allocating them capital to trade and invest on their behalf and benefit from the potential upside of the investment activities, also from the talent of the industry.

In terms of risk in investments, Goldman Sachs intentionally and strategically diversifies exposures of the investments of its clients across asset classes in global financial markets to decrease downside portfolio risk. Every investment might be inherently exposed to either a single or a multitude of risk types. Types of risks could include systematic and unsystematic ones, ranging from currency rate risk in investments with foreign currencies; interest rate risk in investments in cross-financial markets; market risk in investments with publicly traded companies in national stock markets; credit risk in investments and trades with their clients, financial dealers, service providers such as financial brokerage companies; illiquidity risk with investments in over-the-counter exchanges and financial derivative products where there is less trading volume relative to traditional investment products. They constantly attempt to come up with new and better ways to mitigate and hedge the risk and exposure in investments using other counter-positions and hedging instruments.

Goldman Sachs also opts for utilizing advanced technological methods to track and monitor investments, and in the idea-generation process. GSAM's quantitative advanced calculational and algorithm program “Quantinomics”™ aims at analyzing macroeconomic dynamics and trends using big data programs to provide reliable predictions at high precisions levels in equities, commodities, rates, currencies.

Goldman Sachs Asset Management's investment management revenue amounts to a substantial portion in total revenue of the Goldman Sachs company. Goldman Sachs reported investment management revenue of $6,5 billion, $5,8 billion, and $5,4 billion for the year-end periods of 2018, 2017 and 2016, respectively. (Annual Reports, Goldman Sachs: 2016, 2017, 2018).

Pacific Investment Management Company, or laconically referred to as PIMCO, founded in 1971, is an international investment management company, as the name suggests. PIMCO has $1,6 trillion in assets under its management as of fiscal year end of 2018. PIMCO has 14 offices around the world in the Americas, Europe and Asia, has clients from more than 50 countries, more than 250 portfolio managers around the world.

PIMCO executes investments in all asset classes across the board, and has a broad set of fund products, targeted at different types of customers including retirement funds and pension funds from both public and private sector. For the purposes of yielding positive returns on clients' investments, PIMCO follows an approach of executing a multitude of investment strategies, depending on the time horizon for the investments and the asset classes that are invested in.

In spite of the fact, that PIMCO places a great importance on fixed-income products, PIMCO's area of expertise in investment strategies entwines itself around a good deal of asset classes and timeframes. Focus points in those investment strategies include benefiting from cash in short-term investing and trading strategies, fixed income strategies in corporate debt and credit, government and corporate bonds, strategies that aim to exploit foreign currencies, real estate and so on. PIMCO, as a major investment and asset management company, is home to a large number of open-end, close-end, interval funds exchange-traded funds that track different dynamics in global financial markets.

PIMCO also puts a great emphasis on diversification, in order not to yield negative returns during different time horizons, and also not to be dependent on a small number of strategies. Therefore, PIMCO has a broad scope of funds invested in a large scale of assets in money markets, global credit markets, corporate credits and debts, high-yield bonds, derivatives, real estate- mortgage- and other asset-backed securities, developed market debts, emerging market debts, emerging market equities, commodities, fixed-income instruments in foreign currencies, emerging markets currencies, distressed securities.

PIMCO also keeps alternative strategies at the disposal of its investor clients. The company utilizes hedge fund strategies and allocates investments into global macro strategies, corporate credit strategies, credit relative and volatility arbitrage strategies.

In terms of PIMCO's short-term time horizon investment strategies, the company aims to preserve its client's capital, and enhance total returns from investment activities by investing in fixed-income instruments with short-term maturities and commercial papers, largely in money markets, where a lot of financial instruments and assets of short-term maturities and high levels of liquidity are borrowed, traded and invested in. Short-term maturity could mean starting from a single overnight to maturities under a year. PIMCO carries out its short-term strategies in a large set of countries' financial markets, different currencies, and different sectors. Along with investments denominated in different currencies, PIMCO deploys currency hedges in order to protect the downside risk in investments.

In terms of fixed-income assets, the mainstay of PIMCO's investment strategies is based on returns that are risk-adjusted due to the fast-changing nature of returns in bond markets, and yielding net positive returns on investment through capital appreciation in the fixed-income securities invested in. The company invests in a range of bonds from high-yield corporate bonds to bank loans, emerging countries' government and local bonds. There is a number of reasons why this these strategies are deployed by the company and preferred by the investor clients of the company, one of them is to generate streams of cash flow using funds that constantly invest in fixed-income securities, amongst other drivers, generating future retirement income for individuals and corporate workers, enhancing income in general by generating revenue streams from bonds.

In the equity class, where the shares of public companies are traded internationally, the company deploys several strategies. One strategy is to locate and invest in stocks that are traded at substantially discounted levels in relation to company's prediction and estimation in the intrinsic value of the stock. This estimation takes its value based on fundamental analysis pertaining to the given company's financial numbers and comparisons to industry rivals, and technical analysis based on historical price action movements of the stock's value.

Another strategy in equities is the emerging markets strategy, the essence of which is to take advantage of the fast dynamics of growth in emerging economies, and its reflection on the companies' financials in the emerging markets. PIMCO's selected benchmark in this strategy is the widely accepted MSCI emerging markets index. MSCI emerging markets index is, according to the MSCI's definition: “The MSCI Emerging Markets Index captures large and mid-cap representation across 24 Emerging Markets (EM) countries. With 1,136 constituents, the index covers approximately 85% of the free float-adjusted market capitalization in each country.” (MSCI, 2018). Accordingly, the main aim in this strategy is to generate higher returns compared to MSCI EM Index.

Yet another example of the strategies employed is to invest in companies that pay dividends to its shareholders in a stabile way in long-term periods and increase their earnings per share periodically.

It should be noted that equity market strategies abovementioned are, in general, long-only strategies. Meaning, that they mainly consist of buying securities only. Since PIMCO is an asset management company and not a hedge fund, it has some limitations in deploying strategies and using hedge-fund tactics across the board, such as short-selling and using leverages with positions.

Regardless, PIMCO deploys long/short strategies in equities, putting a larger weight on the long side. This is to add to hedging measures, as in, if the whole market became a subject to powerful selling due to an unexpected risk event, the short part of the positions would gain in value due to capital depreciation and the nature of the positions and offset the investments' capital losses.

PIMCO, just like in fixed-income and equity classes, offers a broad range and similar products and strategies for its clients in other asset classes such as foreign currencies and real estates. Currency strategies are laid out by means of comparative quantitative and qualitative analyses in economies' macroeconomic and financial data.

In terms of alternative strategies, PIMCO is known to employ more flexible hedge fund approaches with a tendency towards opportunistic, global macro strategies and so forth.

In terms of ETFs, PIMCO markets actively managed and passively managed (index-tracking) funds to its clients to invest in particularly selected themes, sectors, countries, regions, geographies without with the convenience of having all the investments in a single position.

According to PIMCO's portfolio of investment approaches, the company, at any given time, carries out a total of 103 different investment approaches and strategies across asset classes in international financial markets. That is not to say that they have 103 completely different investment strategies. Some of them are close or alternative versions to one another, derived from one another, or in the vicinity of each other, just applied in a different asset class.

In terms of actively managed and passive funds, PIMCO offers a total of 422 funds. They include closed-end funds, exchange-traded funds, interval funds, mutual funds.

PIMCO reported $6 billion, $5,9 billion and $4,8 billion investment management revenue for the year-end periods of 2018, 2017 and 2016 respectively. (Annual reports, PIMCO: 2016, 2017, 2018).

BlackRock, just like PIMCO, is an investment management company in full measure. The company has investor clients from more than 100 countries and more than 70 offices all around the world.

As of the first fiscal quarter of 2019 and fiscal year end of 2018, BlackRock is the largest investment management company with assets under management with a little under of $6 trillion dollars. BlackRock has a wide portfolio of investment products, especially in terms of ETFs for its investor clients to select with respect to their investment perspectives, easily get in and get out of investment positions as they see fit.

For individual investor clients around the world, BlackRock provides hundreds of open-end mutual funds that target and concentrate on all types of various asset classes, various regions' economic growth, various processes that execute different types of investment strategies and styles.

BlackRock also acts as an investment advisor for their clients with its close to two thousand investment advisors and more than 20 investment centers interspersed through some of the biggest and most important financial hubs and cities around the world.

BlackRock, since it addresses the needs of a large audience of individual, governmental, institutional and corporate clients, it agglomerates almost all of the investment strategies in the industry used by investment management companies, investment banks, hedge funds, open- and close-ended funds. Therefore, in terms of categorization, BlackRock cannot be tied to a single strategy, it is safe to say it is a Multi-Strategy firm that bundles a multitude of strategies together to be used together or separately, based on discretion and needs of its clients.

In its portfolio of products marketed to their investor clients, BlackRock focuses mainly on Exchange-Traded Funds, investment products of retirement plans, products for enhancing income, products that focus on multiple asset classes simultaneously, and lastly, alternative types of investments.

BlackRock's ETFs are grouped together under the brand iShares. BlackRock offers a total of 115 iShares ETFs under 5 main asset classes: Real Estate, Multi-Asset, Fixed Income, Equities and Commodities. Outside of the iShares brand, with its limited term unit trusts, offshore funds and international ETFs, BlackRock offers up to 2682 funds in its product portfolio.

In terms of its investment strategies, BlackRock classifies its strategies as alpha, beta, and multi-asset and alternative strategies.

Alpha strategies of BlackRock primarily aim utilize actively managed funds, exchange-traded funds that track and mirror fixed-income products. Strategies mainly target American or international investment grade bonds, interest rates, municipality and other local bonds, leveraged finance products and so forth. International fixed income strategies mainly address and look to have exposure to financial securities in Europe, Middle East, Africa and Asia Pacific regions. In this process predicate their investment activities and the choice of assets on proprietary research of the firm, quantitative analysis methods and proprietary asset selection processes that are not disclosed to the public. Investment products that essentially dependent on Alpha strategies are actively managed at BlackRock, meaning, that a lot of securities can be bought and sold every day, added to or taken out of funds/indexes/packages/portfolios by the company, based on their estimations as to the value of the securities.

Beta strategies at BlackRock, on the other hand, are more inclusive since it includes hundreds of different types of index mutual funds and collective funds. Beta strategies primarily aim at creating an aggregate index that mirrors the aggregate return or loss of a multitude of assets inside the index. It is easier to invest in since these funds are entitled to encompass all the growth reflected on the return from currencies, bonds, equities and interest rates from a country or a region with a single investment position. The company provides its clients and investors with the preferred exposure to an asset class, a theme or a geography on an average or a weighted-average way.

BlackRock puts a good deal of emphasis on diversification as a major investment management company. In the multi-asset strategies, the company deploys global macro strategies, and carries out investments in stocks, commodities, currencies, bonds in international financial markets. The company has 4 main approaches in terms of its multi asset strategies; (1) Global Tactical Asset Allocation; (2) Risk Factor Investing; (3) Index Asset Allocation; (4) Multi-Strategy and Global Macro. What tries to be explained here, is that company's main aim is to generate better returns compared to aggregate benchmarks accepted by the investors such as the S&P500 index, Dow Jones Industrial Index, NASDAQ, or Bloomberg, MSCI indexes for different asset classes and categories. According to company materials, the company's asset managers devise the ideas for investments through a mixture of research, including fundamental aspects and systematic aspects. A top-down asset selection is utilized in the systematic process. Different asset classes, macroeconomic and microeconomic data are also taken on board in order to generate estimations and predictions. Through those predictions, investment managers create insights into asset classes across the board. Those insights are then implemented along with allocation of funds and various types of tools to adjust the returns for risk and for hedging purposes. The company also implements a risk-factor approach in a way that strategies still manage to return positive yields in negative market environments. To ascertain risk factors in the markets, investment professionals monitor and consider macroeconomic indicators, company specific, asset specific, sector specific data flow. In terms of global macro strategies, the purpose is to have a consistent nature of the returns. Strategies try to pinpoint and cash in on events that happen out of a relative mispricing, with counterbalancing positions that have both a long and a short side. Global macro strategies are implemented in equities, bonds, currencies and commodities.

Lastly, with the alternative strategies, BlackRock creates real estate investment funds and hedge funds within its structure and has them carry out hedge fund strategies, that the other funds cannot execute. Under alternative strategies, the company operates under illiquid and liquid parameters. In illiquid parameters, apart from financial markets, BlackRock invests in real assets in infrastructural projects and real estate buildings, provides liquidity and capital to private companies, takes part in privately-financed and government-financed major infrastructure projects. BlackRock has also hedge funds in its investment products' portfolio, that act with more autonomy in relation to the approaches and limitations they might have with the investments. The company offers its experienced investors access to its hedge funds, all sorts of hedge fund strategies, investment without restrictions, and leverage. Only accredited investors can take advantage of hedge fund services, due to the risky nature of hedge funds.

BlackRock reported investment management revenue of $11,9 billion, $11,5 billion and $10,2 billion for the year-end periods of 2018, 2017 and 2016, respectively. (Annual Reports, BlackRock: 2016, 2017, 2018).

In this subchapter, we have had an in-depth examination and a profound look at the operations that are conducted in the industry by three of the largest companies in the market, namely Goldman Sachs, PIMCO and BlackRock. We have established, not only their motives and actions correspond to the means and ways of investment we have defined in the theoretical chapter in terms of strategies, we have seen that they also draw from them to have an edge in international financial world. We are now going to move on to discussing some of the factors affecting their decision-making processes, and then see if these factors are somehow attributable to the theoretical aspects of the study, or if these factors in any way relate to the theoretical foundations of the concept of investment and investment management.

2.3 Factors affecting investment strategy selection process by investment management companies

So far in this chapter, we have looked at how the industry of investment management morphed into the form and shape it is in now, starting from the early 1900's. We have delved into the dominant role that the United States plays in the massive web and interconnectedness of international financial system.

We have then moved onto the market participants. In the first chapter, we first defined what type of companies there are to be considered in the industry. In the second chapter, we have ranked them in terms of their size, in accordance to highly accepted and frequently used metrics and measures in the industry.

We also picked and scrutinized three of the largest companies in the industry, and the ways those companies behave as managing entities of their clients' trillions of dollars-worth of assets in financial markets.

As we have seen, all companies can be qualified as large companies due to their places in the top rankings. Accordingly, another characteristic that they have showed they have in common, is that all companies are home to multi investment strategies in their continuous investment operations and products.

There are articulable and straightforward reasons as to why the companies we have looked at make use of a large number of strategies. Firstly, they have to attract customers all around the world, to attract new investors and keep the existing customers; it is necessary to offer a large portfolio of investment products and strategies available at their customers disposal. Afterall, a large portion of their revenue comes from investment fees, management fees, performance fees, administration fees, market making fees, advisory fees and so on.

Another main reason that should be mentioned is diversification. They, as companies, need to diversify their investments and their clients' investments to naturally reduce their risk. All three companies that we have examined are amongst the largest companies in the world in terms of their exposure to risk and losses. When it comes to financial investments, there is always risk. Together, they have a risk almost up to $10 trillion dollars at any given moment. When it is taken into account that this number is larger than majority of the economies in the world; it is safe to say that the companies in this study are reasonable to diversify their investments as much as possible to protect the asset holdings from an unexpected systemic risk event that could rapidly decrease the value and put clients through large losses of capital.