Asset Management

By Author: Peter Nutter
Total Articles: 4
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Asset Management

"Process" refers to the way in which the overall philosophy is implemented. For example, which universe of assets is explored before particular assets are chosen as suitable investments? The specialist performance measurement firms calculate quartile and decile data and close attention would be paid to the (percentile) ranking of any fund. Multi-factor models were developed as an alternative to the CAPM, allowing a better description of portfolio risks and an accurate evaluation of managers� performance. Figures ware usually compared with other similar funds managed within the institution (for purposes of monitoring internal controls), with performance data for peer group funds, and with relevant indices (where available) or tailor-made performance benchmarks where appropriate. Above-average fund performance appears to be dependent on the unique skills of the fund manager; however, clients are loath to stake their investments on the ability of a few individuals- they would rather see firm-wide success, attributable to a single philosophy and internal discipline;

The different asset ...
... classes are stocks, bonds, real-estate and commodities. "Philosophy" refers to the over-arching beliefs of the investment organisation. For example, does the manager buy growth or value shares (and why)? The skill of a successful asset management team resides in constructing the asset allocation, and separately the individual holdings, so as to outperform certain benchmarks. There are a range of different styles of fund management an institution can implement to suit your needs. We have to distinguish between normal returns, provided by the fair reward for portfolio exposure to different risks, and obtained through passive management, from abnormal performance (or outperformance) due to the manager�s skill, whether through market timing or stock picking.

At the heart of the investment management industry are the managers who invest and divest client investments. Growth during the past three years has been due to an increase in capital inflows and strong performance of equity markets. Sometimes it seems the smaller the firm the better the chance of good performance, this is due to the close attention that can be given to your funds.
Above-average fund performance is difficult to sustain, and you as the client may not be patient during times of poor performance;
A most important factor when choosing your asset management team is: How long has the team been working together?

Revenue is directly linked to market valuations, so a major fall in asset prices causes a precipitous decline in revenues relative to costs.
The theory of portfolio diversification was originated by Markowitz and effective diversification requires management of the correlation between the asset returns and the liability returns, issues internal to the portfolio (individual holdings volatility), and cross-correlations between the returns. Before tax measurement can be misleading, especially in regimens that tax realised capital gains (and not unrealised). Successful fund managers are expensive and may be headhunted by competitors.
Investment management is the professional management of various securities (shares, bonds etc) assets.