Wikipedia of Finance - What is Asset Management Definition and Purpose of Asset Management Company

Asset Management – Definition, Role and Purpose of Asset Management Company


Asset Management Definition:

Any newbie might struggle with the basis of asset management, the reason is overloaded terminologies. One of the most contented and precise definition of asset management is, “A cost effective system that is accountable for monitoring, deploying, operating, maintaining, upgrading and improvising assets of value to an entity, group or an individual. Both tangible (buildings) and non tangible assets like intellectual property, human capital, goodwill and other financial assets can be managed.”

For those of us, who’ve just entered the financial sector the first paragraph pretty much sums up the definition of asset management, nevertheless this chapter entails comprehensive study of asset management.

What is Asset Management? A Generalized Meaning:

In today’s era of globalization, almost every industry’s been experiencing some or other significant threats and challenges, for they have to manage their assets most optimally. In a way every one of us faces this problem. Developing economies are in pursuit to identify such methods or practices that will help them achieve the lowest capital cost, highest return on investments, and simultaneously accomplish utmost immediate benefit.

The countries which are in developing state are busy facing and understanding the life cycle costs of their entire infrastructure. The economies that are relatively more mature are in pursuit to discover ways that will not only enable them to extend their infrastructure’s life expectancy but also help them to address prominent global challenges like climate change and resource management.

Asset management thinking provides us with structure to assist in all of these scenarios. If supervised properly, asset management has the potential to enhance our standard of living and grow our business. Needless to mention it is an imperative component in the gigantic engine of our developing civilization.

Definition of Asset Management in Financial Services:

Financial sector owes a great deal of debt to the process of asset management and asset managers. Basically, asset management implies management of a company or individual’s investments by a financial services company, namely investment bankers. Usually individuals and companies both seek the aid of financial experts to manage and optimize their pension funds, investments, returns, properties, etc.

The financial managers / fund managers / portfolio managers job is to come up with a systematically defined plan based on the goals of their clients and value (both present and potential) of assets. The financial manager, along with his entire team, when invests on behalf of their clients the former one provides the latter one with access to a wide range of traditional and alternative product offerings that would not be to the average investor.

The Role and Purpose of Asset Management:

The key role and responsibility for any Asset Manager or Asset Management Company (AMC) is to manage finance, accounts, regulatory guidelines and investment management. They are approved to work together by the government regulatory and security board. They deal with their investors assets, finance solely with investors interest. They invest client’s funds in securities to fulfil their monetary goals. Asset management companies (AMCs) also offers various diversified investment options like mutual funds, hedge funds, options and derivative funds, pension funds, etc with the intension to maximum profit on investment these organizations gain profit / income by charging commissions or administration expenses to their customers.

Main benefit and purpose of Asset Management program is to ensure an organization’s assets (like Fixed Assets, Physical Assets, Intangible Assets, etc) are utilized as a part of the most productive way. When incorporated in proper manner, it will ensure profits and benefits to large enterprises, colleges, public organizations, private companies. Such asset management program can help companies and organizations to achieve the best profits and benefits at the least cost along with increasing the life expectancy of assets as well.

The Purpose of Asset Management Company:

The top priority or the ultimate purpose of asset management companies that is offering its advisory services to the client is to substantially optimize client’s portfolio. In corporate finance, discovering methods to optimize a firm’s worth by managing fixed and intangible assets and converting them into more reliable, efficient, or cheaper ones is required in asset management. This also includes evaluating asset financing options, asset accounting methods, productions operation management, and maintenance discipline.

There’s heavy demand for asset managers, and this is not constrained to business purposes like corporations, and financial intermediaries, but individual high net worth too, hire them. Further, they carry out investigations and researches, interview people, and perform statistical analyses of competitive companies, markets, and ongoing trends to ensure the profitable returns on investment, and also determine the capital costs involved. It is only after they are satisfied with their study; they either accept or reject the deal on behalf of the client.

Example of Asset Management: It is not essential for an asset manager to hold an “asset manager” license, albeit the registration during hiring one of the asset managers is required with one or more exchanges and/or the National Association of Securities Dealers (NASD). Well, you won’t see a title run by name of, official asset manager of the XYZ Company or any ABC Company, but to be honest, today everyone in the finance world is in need of a capable asset manager – either directly or indirectly.

This has resulted in judgment of most financial experts or professionals on their aptitude to lucratively manage assets. The performance is rated on the basis of efficiency in asset management and it indeed makes a difference, both at the individual and corporate level.

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