Definition: Asset management is actively monitoring and investing client funds in the financial markets typically by investment banker or a brokerage.
What Does Asset Management Mean?
What is the definition of asset management? In its broader definition, asset management is an organized method of introducing, operating, preserving, improving and disposing of various assets in a cost-effective way. Hence, this may refer to the management of tangible assets such as property, land, and equipment and intangible assets such as securities, bonds, intellectual property or human capital.
Financial institutions offer asset management services using both traditional and alternative investment vehicles such as credit cards, debit cards, money market fund accounts and brokerage services. Through assets under management (AUM), a financial institution determines the total funds managed on behalf of its clients as well as the level of risk and performance per each type of asset. The clients of a management institution may be individual investors, but most of the times they are institutional investors such as pension funds.
Let’s look at an example.
Michael holds an AM position in a real estate firm. His duties include conducting research on the real estate market and performing statistical analysis on the trends based on different variables, including location, income level, age, and ethnicity. His goal is to maximize the performance of each individual portfolio of real estate assets of each of his clients, seeking to achieve the maximum gain.
Michael is familiar with all types of real estate, i.e. residential properties, commercial properties, and land. Unlike most of his colleagues, Michael applies a comprehensive real estate AM strategy to capitalize on relevant investment opportunities. In addition, he is familiar with asset accounting methods, mainly the cost method and the market value method, a fact that makes him one of the best in his company. Michael is not certified by any financial management organization, but he is officially registered with the National Association of Securities Dealers (NASD).
Define Asset Management: AM means the managing financial assets with the aim of balancing the costs and capitalizing on investment opportunities.