ROLE OF ASSET ADVISORS JOINTLY WITH ASSET MANAGERS
Asset management is the professional management of securities and other types of financial assets. The most important function of asset managers is to channel savings toward investment. Asset managers help investors manage their savings to achieve a specific investment goal. Asset managers do this by creating products that match investors' needs with companies in need of capital to finance their investment.
Benefits for Investors - Asset management offers retail and institutional investors the expertise of professionals in savings management who can offer different products and solutions to maximize returns taking into account the different risk appetites of their clients.
Lower investment risk - Asset managers can reduce risk for their clients through different avenues. Firstly, they can reduce risk by helping investors diversify their financial wealth across asset classes, products and geographies. Diversification leads to a reduction in portfolio volatility because asset returns do not always move in the same way at the same time. Therefore, investing in a diversified pool of assets is less risky that investing in individual assets.
Asset managers can reduce risk by monitoring developments in industries, countries and regions in which they invest, with a view to screening out bad investments opportunities from good ones. Given that monitoring activities has a cost, asset managers benefit from economies of scale which households and many other investors would find very difficult to match.
Asset management, also known as investment management, is about helping people to provide for their future and to achieve other long-term goals. Individuals, and organisations investing on their behalf, entrust their money to asset managers who seek to make it grow by investing in companies and infrastructure such as transport links and hospitals. They also help to fund governments. Acting on behalf of their clients, asset managers are one of the biggest investors in government bonds. This helps to create jobs and to support a strong economy.
As professional managers of other people’s savings, managers are bound by regulation to act in the best interests of their clients. They take a long-term view on where to invest their clients’ money. For those seeking finance to grow a business, for example, that money can provide a source of funds which can be a useful alternative to a bank loan. Managers buying and selling assets on behalf of their clients also contribute to the smooth operation of financial markets.
Investing means taking risk with the aim of expected reward. Some investors will take higher risks with the hope of higher rewards. While the asset manager will help manage that risk (through diversification and risk management, for example), investors take the risk that the value of assets may go down as well as up.
