Asset management refers to an overall systematic approach to realizing value from the various things that an entity or group is obligated to, within their entire life cycles. It can also apply to non-traded assets and even to intangibles assets such as information. Asset management uses a variety of financial tools and strategies and makes use of techniques such as allocation, re-allocation, and asset protection. The goal of asset management is to maximize return on investment (ROI) through minimizing loss and maximizing capital flexibility.
Why should one care about what is asset management? Perhaps the most important reason why one should care about what is asset management is because financial services institutions – banks, credit unions, mortgage companies, hedge funds, and insurance companies – face very serious challenges when it comes to financing their activities. Many of these institutions are highly leveraged, meaning they have more invested in assets than their actual worth. The result is that they face a situation where, if they fail to provide financial services on time, they will suffer a devastating loss. One way in which this threat is realized is through asset management.
Asset management has two major goals: optimizing returns and minimizing risk. In the first goal, financial services institutions seek to provide optimal asset allocation so that they can realize maximum profits from every investment. The second goal involves minimizing risk. Financial services firms use a variety of strategies to minimize the risk to their portfolios – some use financial instruments such as interest rate derivative instruments, others use exchange traded funds, and still others use other strategies such as putting option purchases on certain financial instruments. All of these strategies have the effect of reducing the risk to a point where investors can manage risk to a level at which returns can be maximized – or minimized.
Of course, what is asset management is not complete without identifying what is being managed. For example, some asset management companies buy a variety of different types of bonds and other fixed income securities to diversify their portfolio. Other asset management companies focus on particular types of financial instruments to minimize their exposure to risk. Still others use “leverage” – meaning they purchase a large number of types of common investment products that are often not closely related and thus tend to have lower incidence of default.
When an institution buys the assets of one or more asset management companies, what is happening is that those companies effectively act as intermediaries. They pool resources and disperse those resources to various different types of organizations, so that the costs of doing business and the risks of doing business are both reduced. In a basic sense, what is asset management is providing a coordinated framework for the allocation and management of those assets. It therefore has the goal of maximizing return on investment (ROI) while minimizing risk.
So what is asset management done? The most typical way of managing investments is through the purchase and sale of financial instruments such as bonds, stocks, and mutual funds. Most asset management firms also engage in short-term investments and the provision of insurance cover for their clients. These firms also facilitate the movement of funds from one venue to another, and they may perform liquidation for the client when necessary. Asset management firms also help to manage archive and archived assets, make collateral to secure, manage and maintain insurance inventories, and maintain records of the real property and personal property owned by the firm.
What is asset management done? Generally speaking, what is asset management does not end at the point of buying, selling, and facilitating the movement of assets. It extends to all of the various decisions that need to be made as part of effective asset management. Some of these decisions relate to what is going to be invested in order to maximize the return on investment. Others relate to what is going to be stored and what is going to be operated.
There are a number of different ways in which the firms can be used to help manage the investments. First and foremost, what are asset management solutions is the ability for investors to have access to their own portfolio information wherever they are and at any time. Secondly investors will get to take decisions about what investments are right for them and which investments are not. Thirdly, what is asset management solutions also entails the ability of investors to change their portfolio whenever they feel that they need to. Finally investors can make use of asset management solutions to make sure that the portfolio is maintained in the best possible condition by making sure that it is diversified across asset classes, managed by professional firms, and kept up to date with regular analysis and monitoring.