Investment advisor and expert Jean-François de Clermont-Tonnerre explains what asset management is and the many benefits…
“Successful asset managers will provide you with sound investment advice and peace of mind, as they use their knowledge and experience to identify the best ways for you to invest, while astutely managing risk and supporting you to achieve your financial goals,” says Jean-François, who is director of AUM Asset Management Ltd.
What is asset management?
But first, what exactly is it? Jean-François says it’s defined as how you manage your financial assets in order to achieve your financial and personal goals. It can include saving, investing and spending, and is often aimed at increasing the overall value of your assets.
Similarly, your goals can include ensuring you have sufficient funds for retirement, generating short-term cash flow or even using your resources to invest in or donate to organisations you support.
“Asset management can be complex and time-consuming, which is why you may wish to work with an asset management company to ensure your assets are used effectively.”
What do asset management companies do?
Asset management companies manage funds for individuals and/or companies. They use their experience and knowledge to invest those funds, building a portfolio of investments for you (their client). And asset managers have to follow strict ethical and professional codes to help ensure that they’re making well-timed and well-researched decisions on your behalf. They are also required to report back to their clients on a regular basis, ensuring clarity and transparency about how the funds are being managed.
A key part of what asset management companies do is find quality investments which are not readily available to individual investors, or even to large companies.
The power of joining forces
Jean-François adds: “If you are working with an asset management company, it is very likely that it will be pooling your assets with those of its other clients to create greater opportunities than would be available to the average investor.
“This is one of the greatest benefits of asset management, as the pooled funds enable an asset management company to diversify the portfolios of its clients more easily and effectively.”
“For example, a particular property might require a large stake to gain the most favourable terms from the seller. An individual investor might be unable to find the required resources, but a pooled fund run by an asset management company could do so more easily. The profits derived from that property can then be shared appropriately among the individual portfolios.”
Asset managers have special skills
Indeed, Jean-François says that the ‘talent pool’ at the disposal of an asset management company is its greatest attribute, as the diversity and knowledge of the team can add huge value to your investments.
“Some managers will have knowledge about specialist markets, such as metals, derivatives or the property market of a particular country. Others will have the ability and experience to understand the interconnections between such subject areas, to identify broader trends,” he says.
Successful asset management companies will also embrace and adapt to the latest technologies, including advanced analytics, to maximise returns for clients.
These experts are putting their knowledge into your service, looking behalf for the best opportunities and identifying areas where the risk is unacceptable.
They understand different clients’ needs
No two clients have the same needs when it comes to asset management, says Jean-François. So skilled managers will tailor and maintain investment portfolios which reflect these highly specific requirements.
“The key is in asset managers building strong relationships with their clients, so that they can identify how best to manage their assets.”
Whatever the needs of the client, a good asset management company will develop a portfolio to suit you. It will also monitor and develop the nature of that portfolio as your needs change.
Not all asset management is created equal
Every asset management company will bring a different mix of knowledge and experience, as well as its own philosophy.
Some will be particularly focused on maximising annual returns, while others look for longer-term rewards. Some will have particular expertise in property, while others might have a geographical focus.
“Whatever your needs, always look for an asset management company which places a high priority on transparency and communication. You are entrusting the company with your assets and must be satisfied that it understands your requirements and meets the highest possible standards of probity.”
Assessing investments beyond the bottom line
A good asset management company, says Jean-François, will understand the many complex elements that make up any given investment, beyond its superficial financial performance.
The managers will have a strong grasp of issues such as the environmental impact of an investment, including its relationship to pollution and renewable energy. Social issues such as human rights and consumer protections are also important and have long-term impacts on an asset.
They will also analyse governance issues, ensuring the entities you invest in are well run and observe the requirements governing ethics, diversity, and health and safety measures.
Many clients are keen for their portfolios to include socially responsible investments, such as renewable energy or infrastructure in developing regions. When I am asked “What is asset management?”, I often use these examples to show how we can help clients to manage their assets prudently and for the benefit of society as a whole.
The biggest benefits
As the customer of a top-class asset management company you gain peace of mind, simply because you know your assets are in the hands of experienced, knowledgeable managers.
They will help you to avoid any regulatory and legal problems with your assets, and ensure they reflect your values and needs.
And ultimately, the biggest benefits are in witnessing the solid, sustainable growth of your assets to help you to achieve your financial goals.
The information contained in this article is not intended as, and shall not be understood or construed as, financial advice. The information is not a substitute for financial advice from a professional who is aware of the facts and circumstances of your individual situation.