Asset management companies are financial institutions that manage the investments of both individual clients and companies. Some asset management companies may provide individual service and account management for each individual client, while others pool the resources of many clients in order to create more diversified trading options. Asset management clients perform a variety of tasks for their clients, including portfolio analysis, market forecasting, investment advice, implementation of investing strategies, and performance analysis.
Every investor wants to make sure that his or her assets are working as efficiently as possible to create returns. While some private investors have enough market savvy to efficiently manage their own money, others may require the services of asset management companies to put their money to work. One of the first things an asset manager will do for a client is analyze his or her current portfolio and suggest a strategy for future investing. Portfolio analysis can show clients where weaknesses in a current investing plan can be turned into strengths, and how current market trends may be used to inform new investing decisions. The asset manager will usually draw up an investment plan based on his or her research and analysis of the market and the goals of the investor.
One of the benefits of asset management companies that work by pooling resources is that they may be able to present clients with investing opportunities that would not be available to them on an individual level. Since pooling resources means greater investment capital, preferential rates and purchasing options may be open to investors that could not qualify for them alone. Investors receive returns in proportion to their investments in the general fund. While this can provide greater opportunity, it also can limit the options of each individual investor to investments in which the company feels confidant.
Once an investment plan is generated and implemented, asset management companies then monitor the strategy and provide clients with regular earnings and performance statements. This allows the customer to know how well the fund is performing, in comparison to stated goals and the original performance estimates given by the company. Since an asset management company will only retain clients if it can show a regular trend of returns, asset managers are often highly motivated to be as educated and responsible as possible. Unfortunately, as seen in the 2008 financial market crisis, even the smartest investment professionals do not make foolproof decisions. As with all investment tactics, using an asset management company does not guarantee a profit, but may provide services and strategies that investors have neither the time nor expertise to manage themselves.