ASSET-MANAGEMENT
WHAT IS ASSET-MANAGEMENT?
Financial asset-management is one of the oldest and most common Wall Street professions. Asset-management is the management of securities and other assets by a professional financial advisor for an investor. The investor may be an individual (such as in cases of private-wealth management), a corporation (including those involved directly in the finance industry, such as investment banks and hedge funds), an organization (whether it be an NGO or governmental, for profit or non-profit) or any other potential owner of a portfolio of assets (for example, universities). A primary function of asset-management is the construction of investment portfolio in accordance with the risk profile and goals of the investor.
WHAT ARE THE KINDS OF ASSET-MANAGEMENT?
There are several different financial professions, some more visible on Wall Street and others less so, that are primarily involved in asset-management. A full service, commission based, stockbroker makes equity and possibly other purchase and sale recommendations to clients based on the clients’ risk-goal profile. Money managers are fee based and have the added responsibility of making purchase and sale decisions on behalf of investors. Typically, money managers are involved in private-wealth management for high net-worth individuals or in portfolio management for institutional investors. Asset-management is also a job performed by financial analysts who work within corporations and organizations, and represents a crucial role of the finance departments of corporations and organizations.
FUNDAMENTAL SKILLS OF ASSET MANAGEMENT?
Asset-management requires broad knowledge of Wall Street and the finance industry. The asset-manager must mediate between the investor and a multitude of investment vehicles. In order to recommend investments, an asset-manager must also have knowledge of valuation and the ability to asses the long-term prospects of a security or other investment. Additionally, asset-management involves the compilation of numerous investments into a portfolio appropriate to the risk-aversion, aims and tax liabilities of an investor. This means that asset-management requires skill in fundamental analysis, including balance sheet analysis and financial modeling, as well as diversification theory, tax law and general accounting.
There are numerous certifications that an asset-manager may hold. Two of the more common are the Certified Financial Planner and Chartered Financial Analyst. Many of the technical skills involved in asset management, and in particular fundamental analysis, are taught in the Investment Banking Institute’s (IBI’s) Investment Banking Bootcamp. Additionally, the Investment Banking Institute’s training provides a rigorous overview of the structure of Wall Street and the finance industry more generally.
WHAT IS THE RELATIONSHIP BETWEEN ASSET MANAGEMENT AND OTHER MAJOR ASPECTS OF THE FINANCE INDUSTRY?
Asset-management may require direct involvement with private equity and hedge funds in the case of private-wealth management or institutional investors. This is because individuals with high net-worth or institutional investors, like investment banks may hold a position in a private equity fund or hedge fund as a portion of their investment portfolio. Additionally, asset-managers of different types may work together for the same investor. For example, a stockbroker may have access to institutional offerings, such as insurance and other institution-specific investment vehicles (e.g., convertible debt instruments created through the investment banking activities of the stockbroker’s firm), that can fill a role in the portfolio an investor has under private-asset management with a money manager.
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