would you say to take a tour of the world’s largest players in the asset management company sector? We warn you, these figures are likely to give you the disease (Md = billion) :
1 – Blackrock – the world leader in asset management company with more than 7 300 billion USD under management
BlackRock, the American group, is the largest company in the world in relation to the management of assets. This, however, is not the oldest since it was founded in 1988 and was introduced on the stock exchange in 1999.
But how does a business also recently manage to carve out the lion’s share in the face of banks, the oldest and best installed?
Thanks to technology, of course! Since its creation, BlackRock has developed its own tool in computer management and risk diversification, a tool named Aladdin (for Asset, Liability, Debt, and Derivatives Investment Network). Aladdin has become the main tool of “artificial intelligence” financial”, which ran 18 000 billion USD of assets in the world in 2019, including 7 000 billion USD of assets to BlackRock, the remainder is for external funds.
This tool has helped Blackrock to better manage the financial crisis of 2008 and take the opportunity to get ahead of all its competitors.
2nd – The Vanguard Group – 4 200 billion USD under management
The Vanguard Group an American group was established in 1975. It has a shareholding structure that is shared and, therefore, is not quoted in the stock exchange. The Vanguard Group is the largest shareholder of several companies famous as Goldman Sachs with a 5.5% share, Apple with over 7% of the capital, and Amazon (outside of Jeff Bezos and his family, of course) with 6% of the units.
3rd – State Street – 2 500 billion USD under management
State Street is the oldest company of our list since it was initially founded under the name Union Bank in 1792.
The name State Street is a reference to one of the oldest streets of Boston, the headquarters of the company, as its logo, a boat, which is a reference to the history of the large industrial port of Boston.
State Street is also famous for having invented and launched the background first ETF in 1993, the SPDR S&P 500 Trust ETF. An ETF is a stock fund, the composition of which is exactly the same as that of a stock market index (in our case the S&P 500) and which reproduces exactly the performance of this index. For example, an ETF based on the CAC40 would be an ETF whose composition is perfectly similar to that of the CAC40 index, and which will reproduce so the profitability of the CAC40.
4th – Fidelity Investments – 2 400 billion USD under management
Fidelity is an asset management company founded in 1946 in Boston.
Fidelity is still majority-owned by the heirs of the founder since the Johnson family owns 49% of the shares, the remaining 51% being majority-owned by the 50,000 employees of the group.
5th – Allianz Group – 2 000 billion USD under management
Allianz Group is the First company non-American classification, it is also the first company that is not a pure asset management group since Allianz is primarily a group of insurance.
Allianz was founded in 1890 in Germany at the time the application for insurance was strong growth in order to cover the risks related to the industrial activities of the time. Allianz is now elbow-to-elbow with Axa for the leadership of the business of insurance in the world.
Allianz today has various different entities of the asset management company, including Allianz Global Investors.
Following the ranking of the largest companies in asset management
In the result of the classification, we find the following names :
- JP Morgan Chase – bank
- BNY Mellon – bank
- AXA group insurance
- Capital Group – asset management
- Goldman Sachs bank
- BNP Paribas – bank
- UBS – bank
- Deutsche Bank – bank
- Amundi funds – asset management
What are the trades of an asset management company?
The broad question is that since, as you have noticed, there is a panel very wide range of investment strategies and each of these strategies is dependent on trades, and specific skills.
Thus, a manager in real estate will not have the same profile, the same way that a manager of a rate.
Here are some trades that we can find in asset management companies:
It is the craft king in relation to the management of the shares. Indeed, it is the manager who buys or sells the stocks in the portfolio based on the analysis that it has in hand.
Therefore, it is the manager who has entirely the responsibility for the performance of the portfolio. It is, therefore, to him who harvests the bonus when the portfolio is performing well, or the disgrace when he is doing less well than their counterparts in competing funds.
Most of the managers are specialized in one or several economic sectors specific: health, food, industry, consumer goods, automotive, technology, petroleum, construction, etc…
It is a job that requires a perfect knowledge of the economic sectors on which the manager is working to decode all of the daily news that can impact it.
The manager also has a strong financial profile since he manages a stock portfolio. If you do not know what is a beta, a WACC, or DCF, go your way.
Among the daily tasks of a manager, we find :
- The follow-up of economic news, whether on Bloomberg and Reuters or using the notes of the brokers and the big media economics,
- The monitoring of the performance of its portfolio and its daily rebalancing,
- Reading notes and analysis on diverse societies to see if it should buy or sell,
- The reading of the quarterly results of companies in its sector,
- Participation in investor presentations of companies in its sector (either presentation of the results, the strategy, road shows, etc…)
- The calculations of the valuations of its target companies to see if they are undervalued, surcotées or if the price of their action is accurately reflected in their results.
The buy-side analyst is the right arm of the manager. This position is sometimes called the “assistant manager”.
For the anecdote, the author of this article was a buy-side analyst.
His work is closer to that of the manager in the daily monitoring of news and notes of brokers. In fact, the buy-side analyst should know perfectly their sector and continue to inform every day.
On other hand, the analyst does not have the support of the management of the portfolio. Therefore, it does not buy and does not sell shares.
Nevertheless, it is he who produces all the internal notes that will read the manager. It is also he who made the summary of the quarterly results of companies that he covers, and following their recovery.
As the manager, you have a financial profile in addition to knowledge about the sector that you will follow. The DCF and multiples valuation will be your daily life.
The analyst sell-side has a position similar to the buy-side analyst in terms of the production of analyses and follow-up of the news. In contrast, it does not work in a fund or a management company for a manager. The analyst sells-side work with a broker.
It produces notes, financial analyses, and valuations that will be sent to a large set of investment funds and managers. If they find this analysis useful then they will pass by this broker to buy or sell the shares that they wish to, leaving him in passing a small commission. It is a kind of gentlemen’s agreement.
Therefore, the analyst’s sell-side does not pay money directly to his employer, but also indirectly by attracting new customers to his employer when he manages to make himself known as a respected specialist in its sector and to which all the managers trust. A good analyst’s sell-side also brings prestige to his broker if it is good enough to become a respected voice and be listened to by all funds.
Some investment funds and companies managing assets have teams whose job it is to continuously monitor the level of risk of their portfolios to ensure that they comply with the investment policy set.
These trades are often very mathematics as it is to monitor indicators of financial techniques such as Value at Risk (VaR).
If you have seen the movie Margin Call, be aware that the main character, Peter Sullivan (played by Zachary Quinto), as well as his manager Eric Dale (played by Stanley Tucci) are analysts’ risks.
This is a profession that has mainly investment funds and asset management companies. It is less common in insurance, for example, as a part of the invested funds does not originate from investors, but from contributors.
The profession of investor relations is based mainly on two aspects: the presentation of the results to the investors of the fund and the exploration of new investors.
Regarding the presentation of the results to existing investors, it is not only their present performance on a regular basis in the background (usually quarterly), but also to explain the origin of these performances. If your fund has a 2% but the whole market is -10%, you have over-performed in spite of your negative results. This is what you need to understand your investors.
Conversely, if you do +5% but your benchmarks are +10%, you have underperformed, and it will need to explain why.
For the search for new investors, this is to prepare documentation that explains the positioning of the future background, its benchmarks, the opportunity that it represents, and why it is interesting for the potential investor. It is then necessary to organize meetings with these potential investors and roadshows (a roadshow is to make the tour of the investors of a city or of inviting them to the presentations).
A job in investor relations, therefore, requires a strong financial foundation for understanding the key performance indicators and risks that you will communicate and explain.
What are jobs that also have a strong regulatory aspect because it does not sell an investment fund as we sell a yogurt pot? You do not have the right to use certain terms, which could lead to confusion, you must comply with the methods of calculation of indicators, etc.
Finally, you’ve no doubt already guessed, it must be a very good business sense. These are commercial jobs so if you do not like to speak in public, answer questions, be challenged by your friend, and if you’re not a diplomat… you can already forget about this post.
The other areas of the asset management company
There are of course many other trades in asset management, in particular in support functions, but unfortunately, we can’t list them all here.
For example, there are all trades, legal and compliance, thereby ensuring that the substance complies scrupulously with all applicable laws and regulations.
The accounting records all the movements of assets, liabilities, and cash.
The professions in it have become too critical since finance is surely one of the economic sectors most digitized and requires safety standards drastic.
Finally, some asset management companies can also have specific trades to their investment strategy. A background infrastructure or real estate can recruit engineers to audit the assets in which it invests.