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What is asset management?

What is asset management?

The financial world is divided into many different categories. For instance, one can be looking into the differences between trading and investing. Others can talk about passive or active money management. Amongst others, there is also a division between self-custodial investing and the usage of asset managers. Since investing has become increasingly easier to access, many can ask what is the actual role of asset managers and why do they exist in the markets?

Therefore, this article will explore what asset management is, what roles it plays in the financial world, and the fees connected to the asset managers. Moreover, we will outline the differences between passive and active asset management and explain what services and products Crypto Investment offers to its customers in this sphere.

What is asset management?

To put it simply, asset management is a service that connects an asset manager, usually a corporation, with clients. In most cases, these are either high net-worth individuals, governments, pension funds or college funds, and many more. The aim of this cooperation is simple. Clients want some entity to take care of their money so that they do not lose it to inflation just by having it in a bank account. And that is what asset managers do.

The role of the asset manager is to manage the assets of their clients, be it money, stock, bonds, cryptocurrency or other asset classes. Managing assets on behalf of clients is a huge business. According to the Thinking Ahead Institute, in 2019, the overall size of the most prominent 500 asset managers worldwide was more than 104 trillion dollars in different assets. Amongst the biggest are BlackRock (7,3 trillion dollars), The Vanguard Group (6,1 trillion dollars), UBS Group (3,5 trillion dollars), and Fidelity Investments (3,3 trillion dollars).

All of these asset managers and many others do so tremendously well thanks to suiting the clients’ needs, purposes, or aims. Asset managers need to take into account the risks that their clients are willing to accept, the size of their investment, or the investment period. If you want to learn more about what factors the investors need to consider before putting their money into work, click here.

Thus the portfolio of asset management companies does not look the same for each of their clients. On the contrary, asset managers need to be very flexible when providing their services to clients so that they meet their expectations. For instance, some clients might want to have a bit of a riskier portfolio with stocks being the main component, just like the traditional 80/20 split with 80 % of their portfolio being in stocks and 20 % in bonds. Others might want to be more cautious and invest more in bonds or real estate rather than stocks.

Due to all the different requirements, the asset managers need to be open to providing investment in all the different asset classes or financial instruments. Whether that is bonds, stocks, real estate, indices, or even cryptocurrencies, asset managers need to ensure that they are up to speed with their clients’ needs.

Difference between portfolio allocation based on age

Difference between portfolio allocation based on age. Source: schwab.com

Asset managers and fees

In exchange for their services, asset managers take different fees, either fixed or based on how well the asset manager is doing. The rule of thumb is that the bigger the gain the asset manager provides for their clients, the bigger their commissions. However, that is not to say that asset managers do not have the right to ask for the fees.

These companies usually tend to have financial analysts, economists, asset managers, traders, or investment experts on their teams. And all of them need to be appropriately paid.

There are different types of fees that these companies can charge. Any entity aspiring to become a client of such a financial institution should closely monitor what they will be paying for. For instance, there can be not only active and passive management fees but also fees connected to brokerage or robo-advisory services.

Passive vs. active asset management

There are usually two main approaches that asset managers can take when it comes to financial asset management:

  • passive
  • and active asset management.

Passive asset management is a way of managing money for clients that does not require a lot of resources, labor, or extensive control. On the other hand, passive asset management is usually about setting a portfolio for a longer period of time that mostly mirrors the movements of given funds or indices, without any time of excessive changes or rebalances.

This type of asset management thus usually offers lower fees since there are fewer people involved in the maintenance of such a portfolio.

Moreover, less trading or entering and closing positions also means that the portfolio is subject to a smaller amount of transaction fees. Yet, passive asset management is less responsive to events or unpredictable news that are happening around the world and can take financial risks.

On the other hand, active asset management requires asset managers to be more careful with the client’s portfolio and track and rebalance it to reach the given goals. Due to more labor and human capital being involved, as well as higher trading rates, this type of asset management tends to be more expensive. However, it also offers more responsive reactions to any market news or changes of trend and sentiment.

Crypto Investment and asset management of cryptocurrencies

At Crypto Investment, we have decided to help the investors to be able to invest in cryptocurrencies. However, this world is relatively new and can be scary for newcomers, which is a reason why some of them do not ever invest in the sector.

Crypto Investment thus decided to offer an Asset Management opportunity to our customers and clients. We provide various portfolios for our clients depending on allocation to different cryptocurrencies. For instance, Bitcoin Portfolio is 100 % invested in Bitcoin, while other portfolios include a mix of different cryptocurrencies.

Therefore, we offer asset management products that suit the needs of all the investors that are open to being invested in digital assets no matter the risk appetite or investment size. The requirements of the clients will thus be duly noted and considered in the process of portfolio creation.

On top of that, all portfolios are assessed regularly by our cryptocurrency experts. They not only consider the market conditions and adjust all the portfolios accordingly but also create monthly reports and provide information to all the clients so that everything is transparent.

Conclusion

Asset management has been around for decades. This type of managing wealth for clients is mainly connected to massive institutions with a renowned name in the sphere and can offer services that smaller corporations can hardly match. However, asset managers are not prophets or visionaries that could see the future.

They are experts in the field, and they usually have tons of experience, but the markets are always unpredictable. This means that asset managers cannot offer abnormal returns over an extensive period. Thus, everyone needs to think carefully before deciding whether asset management is something they are looking for.

If you are sure you want to invest in cryptocurrencies but are unsure how, we are here to help. We offer services connected to asset management and portfolio management associated with the world of digital assets. If you want to know more about our services, feel free to email or call us.

Published: 01. March 2022
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