Asset Management

Asset managers invest money for a wide range of clients, including individuals, pension funds, insurers, endowments, sovereign wealth funds and companies. They offer products such as mutual funds, exchange-traded funds, separately managed accounts and alternative investment funds.

Asset managers use different approaches. Active management tries to outperform a benchmark by selecting particular investments. Passive management aims to match the performance of an index at low cost. Asset managers may specialise in particular asset classes, such as equities, fixed income, property, private equity or infrastructure.

For example, a pension fund might hire several asset managers, giving one a mandate to invest in global shares, another in bonds and another in property.

Asset managers are usually paid a fee based on a percentage of assets under management, sometimes with performance fees. The industry is dominated by a few very large firms, such as BlackRock and Vanguard, and the growth of low-cost index funds has put pressure on fees.

Asset management differs from wealth management, which provides broader financial planning to individuals. Asset managers are regulated and must act in their clients’ interests.