Here you will learn all about how asset management works, such as what it is and what types of asset management there are.
Asset management means letting an investment professional, such as a bank or a fund company, invest your money on your behalf. Asset management is best suited to people who do not have the time and knowledge needed to invest in a professional way.
The main goal of asset management is for the person managing the investments to make the client's capital grow as much as possible.
What types of asset management are there?
There are essentially two different kinds of asset management, which are:
- Discretionary management, which means that the manager holds a power of attorney that allows the manager to invest as they see fit without first talking to the client.
- Advisory management, which means that the asset manager gives advice and tips, but it is always the client who decides what she wants to invest in.
There are also, broadly speaking, two types of risk-taking, which are:
- Passive management, where the manager focuses on making your investments track a market index, for example by investing in index funds. Passive management often has low fees because the investments do not require any more active handling.
- Active management, where the asset manager does everything to achieve the maximum return at the cost of an increased risk of loss. But constantly trying to identify and buy shares that will probably rise in value requires a high level of commitment from the manager, so active management is usually somewhat more expensive than passive management.
Which kind of asset management should you choose?
That mainly depends on how involved you want to be, how much you are prepared to pay in fees and how much risk you want to take.
If you do not want to be particularly involved in the investments, you should choose discretionary management, while advisory management is better suited if you want full control over your investments yourself.
Passive management is best suited to you if you want low risk-taking and low fees, while active management is better suited to people who are willing to take risks to maximise the return, and at the same time agree to pay the manager a somewhat higher fee for it.
What are the advantages and disadvantages of asset management?
Advantages
Examples of advantages of asset management are that:
- You save time by not having to learn yourself how the investment market works and what opportunities there are.
- You get help from a manager who is an expert at making good investments and has extensive knowledge of how the market works. The manager is also an expert at identifying good investment opportunities.
- You get a complete investment solution that suits your preferences regarding, among other things, risk-taking, personal involvement and management fee.
- You get help creating a balanced investment portfolio with diversified risks, if that is what you want, that is.
Disadvantages
Examples of disadvantages of asset management are that:
- You need to pay a management fee that is often between 0.5–2% per year. The more actively the manager invests, the higher the fee normally is.
- You are not guaranteed a good return just because you hire an asset manager. If the market moves in a way the manager did not foresee, you can lose all or part of the amount you invested.
Who is asset management suitable for?
Some typical target groups for asset management are:
- Investors with a lot of capital who want help optimising the return without having to read up on how the market works and what investment opportunities there are.
- Companies and organisations that do not themselves have the knowledge or time to invest their capital effectively.
Below we go through frequently asked questions about asset management,
What does asset management cost?
It is common for asset management to cost around 0.5–2% of the invested capital per year.
Is asset management suitable for small savers?
No, asset management is not normally suitable for small savers, as a deposit of at least SEK 500,000 is usually required to take out asset management. What do asset managers invest in?
Asset managers invest in, among other things, shares, funds, bonds and/or property.
