What Is Asset Management All About?
Asset management is a tactical endeavor that aims at increasing wealth over time. This it does by trading and maintaining investments that promise good growth. Financial Advisors or Portfolio Managers are all essentially Asset Managers. They perform value maximization tasks on behalf of clients. Their clientele includes individuals, corporations, institutional investors and government entities.
What Does an Asset Manager Basically Do?
An Asset Manager basically maximizes value by decreasing risks. The methodology of doing that is not blanket in nature and differs from one scenario to the other depending on the client. Depending on the risk tolerance quotient of the client and his financial goals, Asset Managers decide whether he should invest or not. They also determine what the ideal nature of the investment would be. They might be real estate, stocks, commodities, bonds, mutual funds or things else. The manager’s job involves creating a client portfolio, changing it if need arises with the accent of the client and supervising the operations at every step.
How Do Asset Managers Go About Their Job?
Asset Managers carry out their tasks only on the basis of extensive research of the market. The Asset Management Association of Switzerland, for example, conducts studies of the national and international market at regular intervals. This is done to identify the dominant trends. For an asset manager in Zurich (or Vermögensverwalter in German, see for example finguide.ch),these statistical analyses come handy in deciding his next move. These studies make extensive use of micro and macro-analytical tools to pinpoint existing trends both in the micro and macro-economic sectors.
A Different Paradigm for Asset Management Companies
Asset Management companies enjoy privileges more in number than an independently working Asset Manager. These financial institutions can issue checks, debit and credit cards and can set brokerage services and margin loans. They make the account holder’s money a part of a money market fund. This is because such funds offer higher returns compared to a standard savings account. These accounts may differ based on whether they are insured by the government or not. Asset Management companies thus take care of their clients’ financial needs.
One must note here that a thin line separates Asset Management companies from Brokerage firms. The minimum investment threshold is higher in the case of the former. Brokerage firms, on the other hand, serve any investors. It is typically the wealthy who deal with Asset Management companies also because they extract fees and not commissions. Brokerage generally leaves clients with greater control over trading decisions than do Asset Management institutions.
The AuM
In the world of finance, Assets under Management (AuM), or Funds under Management, calculates the total market worth of all the financial assets that individuals and financial institutions combinedly control. Switzerland, for example, witnessed an increase in AuM, a growth of 10.6% in 2020 which is record-setting. The AuM measurement lays down the five largest Asset Management institutions of 2021. These names include The Vanguard Group, State Street Global Advisors, UBS Group, Allianz, and Fidelity Investments.
