Asset Management Overview
Learn what asset management is, the different asset classes, careers in asset management, and types of companies that are in asset management.
What is Asset Management?
In finance, asset management is a big industry. In 2019, the top 500 asset managers oversaw $104.4 trillion worth of assets.
Asset management can be described as managing clients’ money with two goals: growing that money and, at the same time, mitigating risk.
Money is typically grown through funds invested in a diverse range of assets, with stocks, bonds, commodities, and alternative investments being the most common types.
In this industry, it’s typical for an asset manager to be compensated with a fixed fee based on a percentage of the assets under management. The standard fee for asset managers is 1% of whatever is being invested. Some asset management funds also make money through a performance fee, similar to a bonus. Performance fees are setup so asset managers are rewarded with a bonus payout when growing the fund to a certain target threshold.
Clients of Asset Managers
Asset management funds generally cater to a client base composed of large institutional investors and high-net-worth individuals. This client base includes entities such as pension funds, insurance funds, insurance companies, educational institutions, nonprofit organizations, and sovereign wealth funds, to name a few.
Here's an example of why a company would want to collaborate with an asset manager:
Insurance companies typically collect quite a lot of cash from their customers who pay the company a premium to insure their car, home, or other assets. Now instead of simply collecting this cash and letting it sit in a bank account to grow at a 1% interest rate, the insurance company would rather give that money to an asset manager who will likely grow that cash balance at a much higher rate of return.
With this in mind, you can imagine how any individual or company with a high cash balance would be interested in having an asset manager grow their sitting money with strong investments.
Difference Between Asset Management and Wealth Management
Asset management and wealth management share many similarities, however, they do differ in one key area. Wealth management encompasses a broader scope of services, including planning for retirement, mortgages, taxes, and more. Asset management on the other hand, runs with a core business model solely focused on managing assets.
Asset managers typically allocate funds across one or more of the four asset classes, which are:
- Equities (Stocks)
- Fixed-income securities (Bonds)
- Commodities
- Alternative investments
Stocks: Blue chip companies, small chip companies, and growth stocks. Some examples of blue-chip companies include Apple, Google, Facebook, Microsoft, and Amazon.
Bonds: Corporate bonds and government bonds. Public corporations like Apple will sometimes sell bonds to raise money in the form of a loan.
Commodities: Popular raw materials. Some examples of commodities include gold, silver, oil, and coffee.
Alternative Investments: Real estate, hedge funds, venture capital, and private equity are examples of alternative investments.
Key Asset Management Teams
Asset management firms are typically composed of several key components, namely the investment team, the client-oriented team, and the support team.
Investment Team: This team is responsible for researching and selecting investments, devising and implementing investment strategies, and managing the portfolio.
Client Team: Client teams focus on building and maintaining client relationships, managing client accounts, and providing investment advice.
Support Team: Support teams provide administrative and operational support, such as compliance, legal, IT, and marketing. Careers in asset management can be found within each of these three parts of the firm.
Asset Management Careers
Investment Team Careers
The Investment Team is the driving force behind managing the fund or firm's assets. This team comprises several key roles broken down below.
Portfolio Manager: The Portfolio Manager is the key decision maker and is responsible for making strategic investment decisions such as buying and selling securities to achieve the fund or firm-specific investment objectives.
Research Analyst: Research Analysts are responsible for monitoring industry trends, analyzing financial data, and conducting in-depth research to identify potential investment opportunities. They formulate recommendations and present them to the Portfolio Manager for final approval.
Trader: The Trader executes trades on behalf of the Portfolio Manager's instructions, buying and selling securities in the market to implement the investment strategy.
Since asset management companies typically operate on a global scale, individual investment teams usually specialize in a particular region (North America, Europe, Asia, etc.) and asset class (stocks, bonds, real estate, etc.).
Client Team Careers
Client teams focus on customer service and maintaining relationships with clients. They handle client inquiries, provide investment guidance, manage client accounts and build trust with clients.
Sample Roles:
- Client Service Representatives
- Relationship Managers
- Account Managers
The primary goal of this team is to attract new investors and keep current clients. By bringing in new investors who can add more money to the fund, the firm as a whole will be able to generate more revenues from fees and performance bonuses.
Support Team Careers
The support team works to ensure the other two teams can do their work by keeping the back-office operations running smoothly. These teams do this by providing legal assistance, administrative support, and more.
Sample Roles:
- Legal
- Human Resource
- Compliance
- Finance & Accounting
Asset Management Work Hours
The chart below provides an estimate of how many hours a junior analyst might spend working in each asset management team relative to a junior investment banker and management consultant.
Overall, junior asset management roles tend to have better work hours than investment bankers and management consultants. In return, these roles tend to have lower annual earning potential.
An entry-level asset management investment analyst in New York or San Francisco may begin earning $70-80k annually, not including a bonus. The client teams and support teams earn less than the investment team with fewer expected working hours.
Asset Management Career Skills
Investment Analyst Skills
An investment team analyst will benefit from a strong finance and quantitative background that will allow them to perform the proper due diligence to evaluate and pitch potential investment opportunities.
Required Skills:
- Finance & accounting fundamentals
- Spreadsheet modeling
- Market research
- Data analytics
Client Facing Skills
Client-focused roles will benefit from strong interpersonal and communication skills that will allow them to engage valuable firm clients.
Required Skills:
- Business writing skills
- Sales and interpersonal skills
- Basic understanding of current finance trends
Support Team Skills
There are quite a variety of supporting roles that require different specialized skill sets that can help contribute to keeping the flow of operations running smoothly.
Required Skills:
- Communication skills
- Legal and compliance knowledge
- Basic financial knowledge
Top Asset Management Firms
When it comes to types of companies, there is a split between pure-play (companies that only do asset management) and investment banks with asset management divisions (Ex. Goldman Sachs, JP Morgan, etc.).
Top Five Asset Management Companies:
- BlackRock (USA)
- Goldman Sachs Group Inc. (USA)
- The Vanguard Group (USA)
- UBS Group (USA)
- Fidelity Investments (USA)
(According to Entrepreneur.com)
The firms mentioned have exceptional internship programs that can help students and young professionals secure well-paying jobs in asset management on Wall Street.
Additional Resources
If you’re interested in getting a job in asset management or anywhere in the finance sector, Career Principles is the place for you! Every week we post a new finance or business article you can read for free.
We also teach a course on finance and valuation and an excel course which can be especially beneficial if you’re interested in asset management or other competitive finance and investment roles.
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