The Basics Of Asset Management

Asset management is the process through which an individual or firm- usually referred to as an asset manager- acquires, develops, operates, maintains and disposes off assets on behalf of another entity. Assets in this context may include commercial and residential buildings, shares in listed companies, private investments, bonds, and shares in investment vehicles among others. We explore the basics of asset management including office refurbishment service role played by the assets managers from time to time.

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Role of Asset managers

Increase the value of the portfolioThe greatest reason behind hiring asset managers is to ensure that the value of the portfolio increases over time. The asset manager identifies both short and long term investment options available, ranks them based on their rate of return and distributes the available resources across these investments such that at the end of the day, the total value of the assets increase. The manager is then tasked with close monitoring of these different investments such that appropriate action is taken when need arises.


Risk Management

Owing to their experience in the investment world, asset managers have an in-depth understanding of the risks facing their investments and possible ways to mitigate these risks. A proper risk management approach dictates that the asset manager should distribute resources across volatile and non-volatile markets; high, medium and low risk investments; emerging and established markets long term and short term positions and so on. This is to safeguard against adverse market movements that can wipe out the whole portfolio in a matter of minutes. 


Maintenance of assets

In the case that the portfolio includes physical assets such as property, it is the duty of the asset manager to ensure that these assets are well maintained through proper cleaning, conducting renovations and refurbishments where necessary. The manager must also ensure that land rates and all amounts due to the authorities are paid as and when they fall due. This way, the property will not prove problematic in future and especially during transfer or disposal.


Research

In order to make efficient investment decisions and to adopt proper risk mitigation measures, asset managers must remain up to date on market trends in various industries. This is only possible through research and subsequent in depth analysis of the data acquired from this research. The asset manager must be able to make sense of raw data, sort it accordingly and then use it to analyse market trends on a micro and macro level. The insights gained are then utilised to determine the likely market movements and subsequently to align investments accordingly.


Compensation of asset managers

In most cases, the management fees paid are based on the return on investment delivered in a certain period. This is usually expressed as a percentage of the net earnings for the period under consideration. If the return on investment exceeds the agreed upon rates, the managers may receive a performance bonus on the same. Therefore, it is in their own best interest, for asset managers to deliver the highest return on investment possible. This is also important since acquisition of new clients is pegged on the performance of the existing portfolio.