Asset management is the field of finance that aims to increase the value of invested assets over a period of time. Blackrock is the biggest asset management firm globally, holding assets worth 10 trillion US dollars. This is a huge amount of money, isn’t it? And the people who handle this sort of wealth are known as Asset Managers or Wealth Managers. If just the sound of money gives you a tingling sensation, then asset or wealth management is the domain worth exploring. And today, with this article on ‘What Is Asset Management,’ we are exactly going to help you get on track with exploring this incredible field of finance.
What Is Asset Management?
The word Asset Management refers to the financial service of managing assets via the use of financial instruments to increase the value of the invested assets by clients. Simply put, asset management within the world of banking and finance is all about managing and investing large sums of money on behalf of the client in order to get a positive return over the long run.
Clients that contact these asset management firms have enormous sums of money that, if left alone, will depreciate in value. And to refrain that from happening, asset management companies provide clients with expertise across a wide range of asset classes, depending on their investment portfolio.
Let's take a look at the asset management businesses' clientele. The asset management clientele is categorized into two parts: Individual Clients and Financial Institutions.
Individual clients are wealthy individuals, whereas institutional clients include insurance companies, government agencies with public investments, charities, and corporate pension funds.
Asset management firms provide expertise in a wide range of asset classes, including equities, bonds, commodities, real estate, private equity, etc. Furthermore, the major asset management firms have subsidiaries worldwide; thus, they can also provide geographical expertise. Initially, these firms research customer needs and constructs an actionable investment portfolio. This portfolio covers all aspects of the financial market.
How Does Asset Management Works?
Moving forward, in this what is asset management article, we will discover asset management’s functioning with the help of pension funds example. But, before that, let’s understand what a Pension Fund means? Consider a pension fund to be a huge pot into which employees of private enterprises put a portion of their salaries to ensure their financial future. This superannuation fund or pot covers employees' retirement expenditures.
For instance, consider Apple INC's scheme of a pension fund. And since Apple INC has a huge employee base, the amount of money going into this pension fund every month will be quite substantial.
Since we are dealing with a large sum of money, there is a possibility that many economic factors can impact this fund and reduce its value. Below, you can see the factors that majorly impact currency depreciation.
As a result, to avoid financial damage, these funds must be invested in financial markets to increase the fund's value so that the employees can rely on it. Asset management firms basically invest this pool of money across different asset classes. The researchers search for staggering stocks, commodities, or government bonds that will rise in value with time by making a thorough quantitative analysis. The portfolio management team finds out what kind of investments the client pension fund wants to make and creates the risk profile based on the same. In the next phase, asset managers invest the amount of money and track its growth over a certain period of time. This is how the asset management firm operates on a day-to-day basis.
Career Opportunities in Asset Management
An asset management firm has a wide variety of employment categories. However, three main profiles in asset management essentially drive business. Moving forward, we will learn more about them.
The sales team is in charge of building customer connections and understanding their demands. These professionals will introduce clients to the company and construct investment profiles.
The research team, which is made up of expert research analysts, assists the investing team in locating the best financial solutions accessible in the market that have the potential to expand over time.
3. Portfolio Management
Portfolio managers are the individuals ultimately accountable for investment decisions. Additionally, these individuals construct and maintain client portfolios based on the needs identified by the sales team. They also ensure that the assets are on a growing path.
According to Glassdoor, the typical yearly income for an asset management professional in the United States is from $71,000 to $130,000, whereas it ranges from 7.2 LPA to 35 LPA in India. When it comes to work-life balance, asset management jobs provide greater flexibility than other investment banking and consulting jobs. People work hard, yet 16-hour work shifts are quite rare.
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In this ‘What Is Asset Management’ article, you discovered the field of asset management and what it is. After that, you understood how an asset management firm operates with the help of a pension fund’s example. Finally, you went through the broad career prospects that drive asset management firms' businesses.
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