Asset management: definition and function
The financial industry, led by asset managers (asset managers), brings together all actors in managing financial assets with recovery in mind. It is an essential element of modern finance. Banks, insurance companies, and asset management companies play a key role.
Good to know: in France, the Autorité des Marchés Financiers (AMF), approves, and monitors management companies, ensuring the compliance of group savings products and penalizing the deviations.
Why resort to the management of assets?
In real estate, stocks, bonds, property, venture capital, etc., asset management is to allocate investments between different asset classes in order to optimize the risk/return profile of a portfolio.
The management of assets for all stakeholders who wish to promote a heritage: individuals, institutional investors, and States.
The companies specializing in the management of assets are often subsidiaries of insurers or banks. They are required to distinguish between the management they carry out for their own account and those carried out for third parties. They are more of a management card: depending on the objective of the heritage of a client (for example, the preparation of the pension), the manager chooses the best asset allocation possible, in line with the level of risk accepted by the customer.
How does asset management?
With the management of assets, whether it’s a private investor or institutional, it is the manager who takes over the management of its customers ‘ assets. This management is guided by statutory and contractual obligations. Its goal is to achieve the best possible performance.
There are several types of asset management :
- The management-driven, which returns to entrust your money to an asset manager so that they are managed according to the direction chosen by the investor.
- The collective management, for the purchase of shares of Mutual funds or units of FCP, gives you the ability to invest across multiple asset classes, sometimes inaccessible to a particular investor (international obligations, etc).
- Specialists distinguish 2 types of collective management: active management, which seeks to double a benchmark, for example, the CAC 40), and index management (whose objective is to replicate, as closely as possible, the performance of a benchmark index, for example, the SBF 120).
- The management under mandate comes to entrust the management of its portfolio to a manager approved by the AMF, in respect of wealth objectives previously defined.
- Direct management, allows you to manage its portfolio of assets without any intermediary. Each asset class is characterized by risk and a specific yield.
What are the duties of asset managers?
Since the subprime crisis, the regulation of business finance (Basel 3, Solvency 2) and the international accounting standards (IFRS9, IFRS17) have changed a lot. They are useful in attempting to discern the risks to financial institutions.
Since the spring of 2021, the Regulation on the publication of information in the field of sustainability in the financial services sector (Sustainable Finance Disclosure Regulation – SFDR) compels asset management companies to classify their funds and to make it clear to those who have a true objective of sustainable investment. This regulation allows investors to compare the approaches to ESG funds: FCP, Sicav, etc
By the end of 2021, the European commission has published proposals for amendments to the european directives on managers of alternative investment funds (AIFMD) and Ucits. These changes are intended to strengthen the harmonization of the conditions for the marketing and pre-marketing of products UCITS and AIFS in Europe. They focus in particular on the management of liquidity risk and the publication of prudential information.
