LEARN ABOUT THE WORLD OF INVESTMENT BANKING
Asset Management
Asset management involves the management of investments on behalf of clients in order to achieve their specific financial goals.
Key aspects
Financial institutions such as hedge funds provide this service to manage their clients' portfolios of various assets. These assets include stocks, bonds, property among other investments. Clients come to them usually to increase their wealth and asset managers need to manage risk effectively and generate income.
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The roles of asset managers are listed below.
Portfolio Management
They need to create and manage an investment portfolio that it is suitable for their client's risk tolerance, investment goals, and time horizon. This involves diversifying the portfolio and making vital decisions on which assets to invest in and how much they should invest in an asset.
Investment
Strategy
They also need to develop an investment strategy based on their analysis of the market and current/future economic conditions as wells as their client's preferences. Active management involves frequently buying and selling assets to outperform the market - this seeks high returns but has higher risk. Passive management aims to match the market's performance, often through index funds.
Risk Management
This involves identifying and addressing associated risks with the investments. Common mitigation techniques involve diversifying their portfolio, hedging and portfolio rebalancing. Hedging is an investment strategy that mitigates risk by taking an opposite position in a related asset in case there are unexpected price changes.
Client Relationship
Understanding the financial needs and goals of the client is very important in developing an appropriate investment strategy. Providing the client with regular updates and reports on the portfolio's performance, the market conditions and advice is also required to maintain a strong relationship.
Complying to Regulations
Asset managers also must ensure all their investment activities comply with regulatory requirements and industry standards.