Asset management, definition, explanation

What is Asset Management? – Definition and Solutions

Definition of asset management

The term asset management is synonymous with wealth management. As a financial service provider, an asset manager manages the assets of his or her clients. The task includes not only providing professional advice, but also making investment decisions based on each client’s investment strategy, risk tolerance and financial situation. Asset management is aimed at wealthy private and institutional investors who invest their assets in liquid asset classes (equities) and illiquid asset classes (funds).

In this age of digitization, new ways of managing assets are emerging. Technology-based asset management solutions enable investors to obtain a greater degree of transparency for their investments in line with modern requirements.

In this article, the following aspects will be examined in greater detail:

1. What is asset management?
2. Why do you need asset management?
3. What are asset management solutions?
4. Summary

What is asset management? 1

The term asset management is synonymous with wealth management. As a financial service provider, an asset manager manages the assets of his or her clients. The task includes not only providing advice, but also making investment decisions based on the client’s investment strategy, risk tolerance and financial situation. Asset management is aimed at wealthy private and institutional investors who invest their assets in liquid asset classes (equities) and illiquid asset classes (funds).

Institutional Investors

Institutional investors are institutions that engage in capital market activity alongside private investors (small investors). Institutional investors can have a noticeable impact on the financial market due to the volume of investments they undertake. In their capacity as legal entities, they invest funds on behalf of third parties, always taking into account the best economic interests of those parties. Their professional qualifications and sound experience enable them to make investment decisions in accordance with specifically defined objectives. Institutional investors include pension funds, insurance companies, capital management companies, family offices, foundations and credit institutions.

 

Private Investors

Private investors are persons who invest in financial products identified as being suitable for them, based on in-depth advice. Private investors, also known as retail investors, are subject to special investor protection. Asset managers have a duty to advise private investors more comprehensively than institutional investors and to document all discussions in full. The aim is to create transparency with regard to both the costs and the risks that an investment entails.

 

Why asset management? 2

Asset managers efficiently allocate capital by investing monies provided by private and institutional investors in productive investments.

Institutional Investors

Institutional investors have the competence and expertise required to make investments. Their own in-house departments develop and implement investment strategies tailored to the institution’s requirements. Their expertise includes strategic structuring, executing transactions and actively managing the institution’s portfolio. Since institutional investors invest large volumes of funds belonging to organizations such as banks, investment funds, insurance companies, etc., their investment decisions often have a significant impact on financial market developments. Institutional investors are subject to both internal and legally prescribed investment guidelines, which limit the risk of the investment and at the same time ensure returns and liquidity in the best interest of the institution.

 

Private Investors

Private investors pay for know-how and expertise by commissioning an asset manager to manage their investments on their behalf, obviating the need for tedious, time-consuming familiarization with the complex capital investment market. Investment decisions are made and pursued in accordance with the asset manager’s investment objectives. The personal needs of the private investor are taken into account when compiling the portfolio (e.g. environmental, social and governance (ESG) funds). Analyses and standardized reports keep the private investor up to date and serve as a basis for regular discussions and any changes of strategy. Private investors are protected against fraud, misleading offers and cheating by numerous laws.

 

What are asset management solutions? 3

Asset management solutions are software-based products that help investors to structure their assets, make investment decisions and manage their portfolio. Investors have a variety of options at their disposal:

Insourcing

Insourcing means purchasing and utilizing software-based products in-house. In order to efficiently transact, analyze and manage their investments, investors can make use of a variety of IT products and software solutions that are freely available on the market. They use externally developed asset management solutions that they introduce, familiarize themselves with and operate independently on an in-house basis. Product training courses enable investors to become experts in their own right. By continuously developing the products, investors can regularly expand their knowledge and screen the market for better products. In order to manage their assets successfully, investors often need several IT products, which then need to be linked to one another, leading to additional work and expense. Moreover, the required interfaces often do not exist, which means that the various IT products have to coexist separately without compatibility.

Outsourcing

Outsourcing involves the application of software-based products by a service provider or asset servicer. Rather than operating IT products independently of one another, the investor can employ the services of a modern asset servicer. The service provider accesses the investor’s data and imports them into its systems, tailored for the sector concerned. Depending on client requirements, the service provider supplies evaluations, analyses, reports and workflows and makes them available to each individual client via portals with interactive capabilities. Clients therefore do not need to laboriously and resource-intensively familiarize themselves with the IT products they have selected but benefit from state-of-the-art solutions applied by the asset servicer, which can be custom-designed to suit each client’s individual needs.

As a next generation asset servicer, AssetMetrix offers private capital investors services that optimally support them and ease their workload throughout the entire investment process using advanced technologies. Investors can select from a variety of modules that provide sophisticated asset management solutions for front, middle and back office functions. AssetMetrix leverages a range of customized solutions for investors. Each individual customer has access to the complete range of data, evaluations, analyses, reports and workflows around the clock via a dedicated portal. Clearly defined access rights enable internal and external interfaces to access the data individually and create transparency both quickly and reliably. In addition to an outstanding level of service, investors also benefit from a technology that is continuously being enhanced. Updates are implemented without additional effort for the investor, new applications or tools are introduced both extensively and comprehensibly.

Data input: AssetMetrix takes care of the labor-intensive input of all the data relevant to your portfolio on your behalf. It also validates the data and stores it centrally as a "Single Source of Truth".
Digital data processing: After the portfolio and market data have been collected and validated, the AssetMetrix IT system automatically processes the data.
Client output: After the portfolio and market data have been processed, all the analyses and reports are made available to the client via the AssetMetrix web portal.

Summary 4

The term asset management is synonymous with wealth management. An asset manager manages the assets of his or her clients. Asset management is aimed at wealthy private and institutional investors who invest their assets in both liquid and illiquid asset classes. Whereas private investors buy know-how and expertise by commissioning an asset manager, institutional investors have the necessary expertise and experience to transact investments in their own right. Asset managers leverage a range of solutions that are available to them to manage their activities, which are primarily software-based products that help investors to structure and transact their investments and manage their portfolios. Investors can purchase these IT solutions and use them for their own purposes, i.e. insourcing. To avoid having to independently operate this array of IT products, investors can also employ the services of a modern asset servicer, i.e. outsourcing.

Are you interested in the advantages that outsourcing offers? Please allow us to introduce you to our services.

AssetMetrix is Europe’s leading next generation asset servicer for private capital investors. Based on innovative financial technologies, AssetMetrix offers modular outsourcing solutions for front, middle and back office activities for Limited Partners and General Partners alike. Our clients benefit from state-of-the-art analysis tools, a service-oriented corporate culture and our independence. AssetMetrix does not act as an investor, investment advisor or placement agent.

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