Tuesday, 26 January 2016

Asset Management

Image source: forbes.com
Asset management, broadly defined, refers to any system that monitors and maintains things of value to an entity or group. It may apply to both tangible assets such as buildings and to intangible assets such as human capital, intellectual property, and goodwill and financial assets. Asset management is a systematic process of deploying, operating, maintaining, upgrading, and disposing of assets cost-effectively.

The term is most commonly used in the financial world to describe people and companies that manage investments on behalf of others. These include, for example, investment managers that manage the assets of a pension fund. The asset management industry has undergone major changes over the last 25 years. From the early 1990s until about 2008, assets under management (AUM) skyrocketed due to the high liquidity in the global financial markets and ever-increasing personal asset valuations (i.e., think housing bubble). This phase also witnessed the formation and increase in the prominence of hedge funds.

Recently, the asset management industry has undergone major changes. After the credit crisis, the sector has shrunk remarkably, as financial markets all over the world contracted, and liquidity, once abundant, became either highly restricted or non-existent. Hedge funds that were once pervasive have closed at ever expanding rates.

Image source: businessinsider.com
Today, many of the largest asset managers have seen their AUM drop 30–40%, not only because of a decline in asset prices, but also because of clients who withdrew their money either out of necessity or due to concerns regarding the financial health of their asset managers. The crisis also brought regulatory failures to light, such as the Bernie Madoff Ponzi Scheme.

Lewis Daidone is a certified public accountant currently working as a consultant for BlackRock, with a specialization in investment management. For more on his credentials, visit this LinkedIn profile.