Definition
Asset management is the systematic, expert management of different kinds of assets, such as stocks, bonds, real estate, and commodities, to maximize returns while lowering risk.
It includes creating and putting into practice investment plans, keeping an eye on and modifying portfolios, and making investment decisions.
How does it work
Asset management operates by creating and executing investment strategies that complement the investor’s objectives and risk tolerance.
Usually, the procedure consists of multiple steps:
1. Assessment of Investment Objectives
The evaluation of the investor’s investment goals is the first step in asset management. This includes figuring out the investor’s risk tolerance, the time horizon for the investments, and goals, such as capital preservation, growth, or income.
2. Portfolio Development
Following the investor’s objectives and risk tolerance, the asset manager will develop a portfolio of assets. This entails choosing a variety of assets that are anticipated to offer the necessary degree of return and risk, such as stocks, bonds, real estate, and commodities.
3. Making Investment Decisions
The manager will make investment decisions on the investor’s behalf, taking into account a variety of variables, including market trends, economic conditions, and alterations in the investor’s circumstances.
Tax consequences will also be taken into account while making investment decisions and seeking to reduce the investor’s tax obligations.
4. Reporting
The investor will get regular reports outlining the portfolio’s performance, the investment approach, and any modifications made to the portfolio.
Types
Institutional and private asset management are the two primary categories of asset management.
Institutional Asset Management
Management of investments for institutional investors, such as pension funds, endowments, and insurance companies, is known as institutional asset management. To help institutional investors achieve their unique financial obligations and objectives, institutional asset managers create and put into action investment strategies.
Example
An endowment, on the other hand, might concentrate on long-term growth to provide financing for a particular purpose, or a pension fund might aim to provide a constant stream of revenue to pay out pensions to its members.
Private Asset Management
The administration of investments for private investors, such as individuals, families, and small enterprises, is referred to as private asset management.
To create and implement investment strategies that support the investor’s objectives, such as retirement savings, property ownership, or income generation, private asset managers collaborate with private investors.
Private asset management can be tailored to each investor’s specific needs and frequently entails tight collaboration between the investor and the asset manager.
Example
A financial advisor building a private client’s unique investment portfolio in agreement with the client’s objectives and risk tolerance. To ascertain the client’s investment objectives and risk tolerance, the financial advisor will evaluate the client’s financial condition, including their income, costs, and debt.
Customized investment portfolios comprising stocks, bonds, mutual funds, and other financial instruments that correspond to the client’s objectives and risk tolerance will be developed by the advisor using this information.
Institutional vs Private Asset Management
| Characteristic | Institutional Asset Management | Private Asset Management |
|---|---|---|
| Investor Type | Institutional investors such as pension funds, endowments, and insurance companies | Private individuals, families, and small businesses |
| Investment Objectives | Typically focused on meeting specific financial obligations and goals, such as paying out pensions or providing funding for a specific purpose | Can vary widely based on the individual investor’s goals, such as saving for retirement or generating income |
| Investment Strategies | May employ a variety of investment strategies, such as diversification and risk management, to meet the specific needs of institutional investors | Can be customized to meet the unique needs and goals of each individual investor |
| Portfolio Size | Typically manage larger portfolios with a higher level of assets | May manage smaller portfolios with a lower level of assets |
| Investment Decisions | Decisions may be made by a professional investment team, with input from the institutional investor | Decisions may be made by the individual investor or in collaboration with a private asset manager |
| Reporting | Regular reports provided to institutional investors detailing portfolio performance, investment strategy, and any changes made to the portfolio | Regular reports provided to individual investors detailing portfolio performance, investment strategy, and any changes made to the portfolio |
Why Asset Management?: Pros and Cons
Pros
Professionalism
Asset management firms employ a group of knowledgeable investment managers that have the experience and training to make wise investment choices. This can help to improve the likelihood of success and give investors confidence.
Diversification
By investing in a variety of various assets, including stocks, bonds, real estate, and commodities, asset managers can assist investors in diversifying their portfolios. Spreading investments among many asset types can assist to reduce risk.
Potential for higher returns
Investors’ chances of higher returns may be increased by asset managers’ access to a larger variety of investment alternatives. Additionally, they might have access to data and research that ordinary investors do not, which might influence investing choices.
Convenience
Since investors do not have to spend time investigating and analyzing individual assets, asset management can be a handy approach for them to manage their investments. This may make time available for other pursuits.
Cons
Fees
As investors frequently have to pay the asset manager’s fees for their services, asset management can be costly. These costs may lower investment returns and affect the portfolio’s overall performance.
Limited control
Investors may have less control over their investments if they outsource investment management to an asset manager. This means investors may not have the power to adjust the portfolio as they see fit because asset managers make decisions about it on their behalf.
Market risk
Asset management entails the risk of market volatility and the potential for loss, just like any investment. There is no assurance of success and assets can still lose value despite the asset managers’ competence.
Asset Management solutions
Insourcing
Internal asset management employing staff and resources on-site is referred to as insourcing. As the business directly controls investment decisions and can react swiftly to changes in market circumstances or investment objectives, this strategy can offer more control and flexibility.
However, insourcing can also be more expensive because the company must devote resources and staff to asset management and may need to make investments in infrastructure and technology to support this task.
Outsourcing
The practice of hiring a third-party asset management company to manage assets on the organization’s behalf is known as outsourcing. As the company may use the asset management firm’s knowledge and experience rather than allocating resources and staff to asset management, this strategy may be more cost-effective.
The business depends on the asset management company to make investment decisions and react to changes in market conditions or investment objectives, outsourcing can, however, also result in a loss of control and flexibility.
IT Asset Management
Definition
IT asset management (ITAM) is the process of organizing and maximizing the acquisition, use, maintenance, and disposal of information technology (IT) assets inside a company. Hardware, software, licensing, and other assets related to technology might be considered IT assets.
Using ITAM, an organization may make sure that its IT resources are being used effectively, and efficiently, and following established rules and guidelines.
Pros
•Savings on hardware, software, and license costs are made possible through ITAM, which aids businesses in maximizing the use of their IT assets and cutting waste.
• Better security: ITAM enables businesses to maintain track of their IT assets, ensuring that all of them are secure and disposed of correctly when no longer required.
• Improved alignment with business objectives: ITAM enables organizations to better match their IT assets with their objectives, ensuring that technology is applied to support goals and add value.
• Compliance: ITAM lowers the danger of fines and legal repercussions while assisting firms in adhering to regulatory obligations, such as software licensing agreements.
Cons
•Cost of implementation: To adopt ITAM effectively, firms must invest in technology, employees, and processes.
•Complexity: Because ITAM needs businesses to track and manage a large number of IT assets across the full asset lifespan, it can be complicated.
•Due to the change in workflows and potential effects on current workflows, some businesses may be reluctant to deploy ITAM.
Conclusion
Asset management can produce returns for investors, just like any other investment strategy, but it also has some risks and unknowns. Several criteria, such as an investor’s investment objectives, risk tolerance, and financial status, will determine whether or not this is a good option for them.
It may be a wise choice for certain investors, but before deciding, it’s crucial to carefully analyze your unique situation and investment objectives. Before investing money a good idea to get professional counsel and do extensive research.
FAQ
How to invest in strive asset management?
To invest in Strive Asset Management fund, you need to follow these steps:
1. Examine the business: Start by learning about Strive Asset Management’s approach to investing. To make an informed investment decision, research the company’s history, investment philosophy, and any other pertinent facts.
2. Determine your investing objectives: When determining whether to invest in Strive Asset Management, take your financial objectives and risk tolerance into account.
3. Create an investment account: You must create an investment account with a broker or financial advisor to invest in Strive Asset Management.
4. Think about funding a Strive-managed mutual fund or exchange-traded fund (ETF): Purchasing a mutual fund or exchange-traded fund (ETF) managed by Strive Asset Management is one option to invest in the company. You will be exposed to a diverse array of investments managed by investment experts at Strive.
5. If you are an authorized investor, you might be able to invest directly in Strive Asset Management. Take this into consideration. This can entail contributing to a venture capital or private equity fund run by the business
If you live in Germany check out Keilconsulting, lead by Andrè Kostolany, Dr Erhardt trainee Eckart Keil.