Asset managers are people trusted with an enormous responsibility – to protect the assets of investors, and ensure that they generate the level of returns the investors wish to get from them. “Investor” here may refer to a corporate institution such as an insurance or pension company, or to private individuals. Groups of private individuals may be catered to at once via collective investment schemes or mutual funds.
Four of the common divisions in assets are stocks, real estate, commodities and bonds. In order to find or recommend the most suitable investments for every client, asset managers need to take into account the client’s needs as well as risk profile. Each of these classes has completely different characteristics – market dynamics, interaction effects etc. To go deeper, individual holdings also perform differently from each other. It is said that the asset class influences the outcome of investments more than the individual holding itself, but the asset manager has to take both into account while trying to generate maximum profit for clients.
One of the primary problems faced by asset managers is the impatience of clients. People tend to purchase shares when the market is on a high, and to panic and sell them at a loss when it drops. This ends up producing the opposite effect from what is intended. A good asset manager can convince clients to invest during a lean period, and to recover their investment when the market hits its highs.
With a shrewd insight into economics and market dynamics, and equipped with a good sense of market timing, an asset manager can generate millions of dollars as wealth for clients, as well as earning a substantial portion of this for himself.