When used in its broadest sense, asset management is any structure under which assets are controlled and monitored by some entity. The term can be used to describe those that manage tangible assets like bonds or currencies, or for less tangible assets like patents and other forms of intellectual property, which has be just as important, as was made clear by the recent acquisition of Motorola's mobile arm by Google with the goal of acquiring mobile patents. In the world of finance, asset management most often refers to different forms of investment management, under which individuals or institutions trust another entity to handle investments. In what follows, you'll learn more about he field of investment management.
Depending on the type of client that an investment manager takes on, he or she will agree to provide a variety of services. These may include but are not limited to the analysis of financial statements, the monitoring and further selection of a client's investments, implementing and acting on a financial plan and managing the swapping of currencies and other financial instruments in order to limit market exposure.
Maintaining an asset management firm can be extremely difficult, due to the hands-off nature of the relationship with the clientele and lack of direct control over the success or failure of the venture. The revenue made by an investment management firm is directly linked to the market, and even the most successful managers make mistakes. Sometimes investment management firms gain attention because of short term year to year success, which is often difficult or near impossible to sustain.
Every investment management firm has an overarching strategy for making gains for its clients. While the strategies employed will vary depending on the allowable risk exposure of a client, every firm has a group of moves and techniques for making money in the market. These styles are often referred to as the "Three P's" of an investment management firm. The philosophy of a manager is the first P. This refers to the overall set of beliefs of the manager or organization. This encompasses beliefs about the market as the whole, related to whether or not to buy into value stocks, strategies about market timing and whether or not funds do their own research or rely on outside entities. The second P is process. This refers to the way that an investment firm enacts its investment philosophy. This describes how an asset manager actually decides when and how to buy or sell an asset, and what strategies he or she uses for hedging or acquisition. The third P, and the one that's most important to some clients, is people. A successful firm will keep in close contact with its clients and try to make them understand the process as much as possible. As many investment management firms are shadowed in mystery, an open policy about corporate structure and overall management longevity can be a vital factor for clients considering taking on a management firm.
When deciding on an asset management firm, it's vital that you understand how the past success of the fund has been measured. There's an industry of companies with the sole purpose of interpreting and analyzing how firms invest and provide returns for their clients, but still, this data isn't always all that clear. For most asset management funds, a calculation is made on a quarterly basis that measures a percentage growth over the prior quarter, demonstrating how much an investment by a client went up by. By comparing this rate of growth to other funds over the same quarter, you an get a good sense of short term success, but it tells you almost nothing if you compare non-matching financial quarters, as even the best funds will do worse than terrible funds in turbulent periods. Rather, you're far better off consulting investment return data over a longer time span, ideally three to five years, which can provide a much more accurate measure of a firm's stability. Even better are measurements that factor in the quantity of risk a firm takes on, as some investment funds have reputations for higher returns and higher associated risk. Other metrics quantify how well firms work in meeting their stated financial goals, as well as measurements that find if failures to do so have to do with a lack of financial acumen or skill on behalf of the managers or whether it has to do with a general trend in the success of investment management firms. Clearly, there's a ton to consider when taking on a new firm!