What Is Asset Management? (With Career Options)
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Asset management is the practice of growing total wealth by the purchase, maintenance and trading of investments that have growth potential. Many businesses hire asset management firms to assist them in making the most of their investments. If you are a business leader, investor or aspiring asset manager, understanding what is asset management in detail is essential to you for smart financial management. In this article, we discuss what asset management is, its types and importance, the difference between asset and wealth management and top careers in asset management.
What is asset management?
Asset management is the practice of paying an asset manager to manage an investment portfolio for a company or individual. An asset manager may work for a financial institution, a bank or a private practice. Asset management covers a wide array of financial and investment services that institutions provide to customers. It involves the exchange of investments within the portfolio. Asset management usually occurs with high-net-worth investments, enterprises and government entities because of the high investment minimums.
Types of asset management
Here are the different types of asset management:
Financial asset management: This is a common type of asset management. It includes managing investment accounts and hedge funds for consumers.
Enterprise asset management: It involves the management of an organisation's capital assets. It consists of operations, acquisition, decommissioning and maintenance.
Infrastructure asset management: Management of public infrastructures, such as bridges, highways, power grids and waterways, comes under this type. It emphasises infrastructure's rehabilitation, maintenance and replacement primarily.
Fixed assets management: It focuses on tracking and management of fixed assets. Its primary purpose is financial accounting, support and loss prevention.
Public asset management: It primarily manages public assets such as parks, schools, airports and other public property.
Digital assets management: Management of the information that a business owns, has the right to use or regulates in any way.
IT asset management: Managing and accounting for all functions associated with information technology assets, including software and hardware. It can be maintenance, contracting or management.
Importance of asset management
Here are some of the major importance of asset management:
Enables a firm to account for all of its assets
The process enables organisations to manage their assets efficiently, whether liquid or fixed. Firm owners can know where their assets are, what are their uses and if there are any modifications to them. As a result, accomplishing asset recovery can be efficient, resulting in better profits.
Helps guarantee the accuracy of amortisation rates
Because of the continuous inspection of assets, the asset management procedure guarantees proper records in the financial accounts. Also, fixed asset management may guarantee that amortisation rates are accurate. It permits the comprehension of daily investment evaluations, which are necessary to ensure that the business's financial statements are consistent.
Helps identify and manage risks
Asset management includes identifying and managing risks associated with the use and ownership of certain assets. It ensures that a business is always ready to address any risk that may arise. The primary use of asset risk management is to prioritise investments. It is often entirely or partially integrated into major asset management procedures across the asset life cycle.
Removes ghost assets in the company's inventory
Ghost assets refer to assets present in the record on a business' asset register but do not physically exist in the workplace. Typically, ghost assets are physically non-existent or are unavailable due to damage or missing components. With a strategic asset management plan, the business owners can know any lost assets and erase them from the books.
Asset management vs. wealth management
Asset management primarily focuses on investments. It is a service provided by the firm to clients having high net worth. In comparison, wealth management focuses only on an individual's financial management. By doing so, these individuals may determine the most effective way to manage and secure their wealth long-term. Depending on your circumstances and degree of wealth, you may require either of these services. Identifying which serves you best may assist you in achieving your financial objectives.
What is an asset management company?
Asset management companies, or AMCs, are investment businesses that combine funds from individual and institutional investors and invest in various assets. They manage investor capital. An AMC invests investor funds into different capital assets, including shares, bonds, master limited partnerships, real estate and private equity. They make all investment decisions according to an internal procedure or investment mandate. Asset management firms have fund managers to oversee their investments, while a research team identifies the right stocks.
Difference between an AMC and a brokerage firm
Asset management firms are trust-based businesses. Their clients delegate trading authority over their accounts to the asset management company and it legally binds them to act in the client's best interests. Whereas, before brokers may execute a deal, they need the client's approval. Online brokers empower their clients to make their own trading decisions and deals. Asset management businesses focus only on the elite prospects. They often have greater minimum investment requirements than brokerages and operate on a fee-based model rather than a commission-based model. Brokerage firms are accessible to all investors.
Top 6 careers in asset management
Below mentioned are some of the asset management job roles that a person can reach in their career:
National average salary: ₹15,427 per month
Primary responsibilities: Asset management organisations hire market researchers to do market or industry research to assist fund managers in their decision-making. They help the senior analyst with all research-related duties, such as client meetings and conference calls. They prepare various research reports, which include company profiles, calculation analysis and more.
National average salary: ₹3,22,133 per year
Primary responsibilities: Credit analysts determine the investment's creditworthiness in debt market securities such as bonds. They develop intricate financial models to assess the borrower's creditworthiness and capacity to repay the loan in the future. A thorough investigation helps the credit analyst to get comprehensive information about the borrower firm and the industry in which it operates.
National average salary: ₹6,58,937 per year
Primary responsibilities: Private equity associates administer the asset management of businesses' private equity funds on behalf of investors. Invest the fund's assets in private firms having high-growth potential and make multi-fold profits for investors willing to take such a high risk. They contact wealthy investors and corporate executives directly to pitch investment in their businesses.
National average salary: ₹25,000 per month
Primary responsibilities: Equity dealers work under the supervision of fund managers. They place orders on the market through the trading interface and successfully close the deal. They show active involvement in the equities and debt markets and they spend the entire day in the dealing room monitoring the markets' behaviour.
National average salary: ₹5,15,830 per year
Primary responsibilities: The fund accountant is responsible for the investor's redemption activities and the computation of the national asset value (NAV) of the fund. They do daily NAV calculations and report to investors and fund management regarding the fund's performance. They account for the fund from end to end, with attention to all investment decisions made by the fund management and a stable profile.
National average salary: ₹4,42,344 per year
Primary responsibilities: Portfolio managers are mainly responsible for developing and managing investment allocations for their clients. They invest on behalf of their customers in the mutual, exchange-traded or closed-end fund's asset. They develop and execute investment strategies and also oversee day-to-day portfolio trading. Their duties include assisting clients in developing investment objectives, focusing on improving investment performance and making reports on investment activity and performance.
What does an asset manager do?
An asset manager handles assets on behalf of their client, making critical investment decisions that contribute to the growth of the client's portfolio. They ensure that the client's investment does not depreciate and that potential risk is minimal. It entails monitoring the market, staying up to date on research and trends and being aware of political, financial and economic news.
Skills of an asset manager
Asset managers are more likely to make immediate decisions that can significantly influence an individual's or business's total wealth and well-being. For that, they require the following particular skills:
time management skills
attention to detail
Average salary of an asset manager
The national average salary of an asset manager is ₹5,36,488 per year. Asset managers earn an average salary of ₹10,20,718 per year in Delhi, the highest in the entire country. The industry and organisation also influence the average salary figure significantly.
Salary figures reflect data listed on Indeed Salaries and the quotes websites at time of writing. Salaries may vary depending on the hiring organisation and a candidate's experience, academic background and location.
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