Meaning of Asset Management
The aim of asset management (short for AM by abbreviationfinder) is to further increase existing assets – and to do so as efficiently and with as little risk as possible. The English word “asset” means “fixed assets”. Asset managers look after private as well as corporate assets and try to increase them through various forms of investment. As a rule, investments are made in funds. This requires extensive know-how and skillful risk management. Traditionally, the financial services of asset management are primarily used by investors with larger capital assets (from 50,000 euros). Small investors, on the other hand, have little chance of finding a private asset manager.
- The decisive advantage of serious asset management lies in the know-how advantage of asset managers over private individuals and companies.
- While pure investment or investment advisors only take on an advisory role, asset managers usually also make investment decisions.
- As part of asset management, the assets of private investors and business customers are usually invested in funds.
What does asset management bring?
The decisive advantage of serious asset management lies in the know-how advantage of asset managers over private individuals and companies. Thanks to their market knowledge, asset managers can make long-term, profitable investment decisions even in rapidly changing markets. You have a good overview and – in contrast to private investors, who often tend to make impulsive decisions – are able to make long-term prudent decisions.
These tasks are carried out by asset managers
While pure investment or investment advisors only take on an advisory role, asset managers usually also make investment decisions. They relieve companies and private investors from a whole range of tasks. The classic range of tasks in asset management includes the following points in particular:
- Information and advice:Asset managers initially have an advisory role. They inform their customers about lucrative investment opportunities.
- Individual strategy development:Asset managers work out an individual investment strategy together with clients. This is essential because every customer has their own needs. In particular, the investor’s willingness to take risks and personal goals determine the investment strategy.
- Market observation:Market observation or market analysis is a central component of asset management. The respective managers not only have to have in-depth economic knowledge, but also know current market developments and identify trends as early as possible.
- Review of investment options:Asset managers review investment products either individually or using statistical methods. In this way, they determine the investment options that best suit the wishes and needs of customers – be it stocks, real estate or life insurance.
- Diversification and risk management:The aim of asset management is to generate the highest possible return on the assets invested at a comparatively low risk. Risk management is therefore one of the fundamental tasks of asset management. There are a number of methods available to asset managers to limit the risk of an investment. In addition to assessing the security and profitability of certain investment products on the basis of one’s own know-how, diversification plays a decisive role in risk management. Diversifying means: The assets to be invested are distributed across several promising forms of investment. This makes the investment strategy less susceptible to crises and leaves room to counteract possible wrong decisions.
The role of funds in asset management
As part of asset management, the assets of private investors and business customers are usually invested in funds. A fund is nothing more than a collection of different stocks, real estate or bonds that are financed with the capital of various investors.
Anyone who participates in a fund with equity becomes a co-owner and may receive a dividend distribution. If you invest in a package of shares – in contrast to buying shares in a single company – the risk is automatically diversified. A fund always consists of a bundle of securities. If the securities of some companies do not perform as expected, this can be offset by the positive development of others. However, one hundred percent investment security cannot be guaranteed even with funds.
In principle, a distinction is made between mutual funds and special funds. While special funds are aimed at companies, banks and the like, public funds can be used by all investors.
Serious asset management: independence and transparency
Serious asset management is characterized by independence. Ideally, an asset manager is not tied to specific products, but rather chooses investments based solely on the client’s needs. Commissions or other remuneration should also not be paid when brokering certain funds. Bank asset managers should at least have access to the entire product range of the respective institution.
Regardless of whether the services of an independent asset manager or the asset manager of a bank are used: Asset management should be characterized by transparency. This means that potential returns and risks are discussed openly. In addition, any costs and administration fees should be conveyed transparently.