Asset management refers to the management of people’s or organizations’ investments, either intangible assets such as intellectual property, goodwill, financial assets or human capital, or tangible assets such as buildings and land.
The person or firm in charge of asset management is an asset manager or investment manager. Their aim is to make us much profit as possible for their client.
Asset management firms have dedicated portfolio managers and access to internal, detailed equity research studies which they claim give them an edge over investors in charge of their own money. In other words, asset management companies claim to know how to make more money than the investors themselves.
In accounting and finance, an asset is anything with an economic value that can be owned.
“Asset Management is the coordinated activity of an organization to realize value from assets. It involves the balancing of costs, opportunities and risks against the desired performance of assets, to achieve the organizational objectives. This balancing might need to be considered over diffrerent timeframes. It is the art and science of making the right decisions and optimising the delivery of value.”
Asset management services are generally offered to rich people, sovereign wealth funds, corporations, governments, and pension funds.
Asset management firms charge a fee, typically a fixed percentage of managed funds. They may also take a percentage of profits, although this clouds the line between a hedge fund and an asset management fund.
Asset management is a huge industry
According to Forbes Personal Finance, asset management is a giant industry, with a collective $53 trillion under management.
The State Government of Victoria in Australia says asset management is relevant to the whole of asset life and encompasses the four main stages of the asset life-cycle, which are:
1. Informed and hands-on decision-making regarding asset investment,
2. Procurement of suitable assets,
3. Maintaining, upgrading, and operating assets.
4. Managing asset treatment at the end of their useful life.
The Financial Times Lexicon defines asset management as:
“The managing of money for investment so that it makes as much profit as possible, for a financial institution or for another person or organization. The managing of a company’s property so that it is used in a way that makes as much profit as possible.”
Video – What is asset management?
In this video, Schroders employees explain what asset management is about.