What is Asset Management? A Comprehensive Guide to Optimising your Investments

Ready to take control of your financial life? Whether you are an experienced investor or just starting, asset management is the key to making your money do the work for you. In this blog, we’ll break down everything you need to know about managing your assets—think of it as your guide to better investing. 

From maximising returns to minimising risk, let’s get into asset management!

What is Asset Management?

An asset management strategy is the plan that governs how your investments are managed to achieve specific financial goals. Think of it as the plan outlining where, when and how you will allocate your assets—whether shares, bonds, property or other investment vehicles. 

A good strategy considers your risk tolerance, time frame and overall financial objectives. It’s not just about growing wealth but managing risk and ensuring your assets are diversified to ride out market ups and downs.

The strategy should be tailored to personal or organisational financial needs for long-term success. To understand how this is positioned, go for a CFO course.

Why Is It Important?

Here’s why having a strategy is key to your financial success:

  • Maximises returns: An asset liability management strategy helps you allocate your investments to achieve the best growth. Instead of just picking stocks or assets, you have a plan in place that focuses on maximising returns over time by taking advantage of the right opportunities.
  • Manages risk: Every investment carries some level of risk. A good management strategy ensures you’re not taking on unnecessary risk. It provides a balanced approach so you can weigh up potential gains against risk and not put all your eggs in one basket, minimising the impact of market volatility.
  • Customised to your financial goals: One size doesn’t fit all in investing. A bespoke asset management strategy is aligned with your personal or organisational financial goals—whether you want to build wealth, a retirement plan, generate a regular income stream or preserve capital for future generations. 
  • Diversification: One of the key principles is diversification, or spreading your investments across different asset classes (shares, bonds, property etc.). This means no one bad investment can hurt your overall portfolio.
  • Adapts to market conditions: The markets are always changing and a good strategy is flexible enough to adapt to changes. Whether it’s responding to downturns or new growth opportunities, your plan can be tweaked to stay relevant and keep your investments safe while capitalising on the latest trends.
  • Long-term financial stability: With a solid strategy, you’re better equipped to achieve long-term financial stability. Rather than chasing short-term gains or making rash decisions, this strategy is focused on steady long-term growth and helps you build wealth gradually while protecting your assets.
  • Better decision-making: Management for oneself is as important as asset liability management in banks. Rather than reacting emotionally or impulsively to market movements, you can make timely and thought-through investment decisions based on logic, data and your financial plan.
  • More confidence and control: With a solid strategy for investments, you’ll have more control and confidence in your financial journey. Knowing each decision you make is part of a bigger plan gives you peace of mind even in times of market volatility.

Key Components of Asset Liability Management

Here are the primary components of asset management. Note that these are different from the types of asset management.

  • Liquidity management: Has sufficient liquid assets to meet short-term liabilities and avoid cash flow issues.
  • Interest rate risk management: Balances fixed and variable rates to reduce interest rate exposure.
  • Currency risk management: Protects against foreign exchange risks for organisations with global operations.’
  • Capital adequacy management: Has a strong capital base to absorb losses and comply with regulations.
  • Gap analysis: Identifies mismatches in asset and liability maturities to reduce risk.
  • Stress testing: Prepares for worst-case scenarios.
  • Regulatory compliance: Meets financial regulations and guidelines.

How to Create a Strategic Asset Management Plan

Follow these steps to create a well-planned asset management system.

  1. Define objectives: Start by setting clear goals for what you want to achieve with your assets. 
  2. Assess current assets: Do a full inventory of your current assets. Review their performance, condition and relevance to your overall strategy. 
  3. Analyse market conditions: Research current market trends, economic factors and potential risks that could impact your assets.
  4. Create a strategy: Based on your objectives and analysis create a solid plan that outlines how to deploy, maintain and manage your assets. Consider diversification to reduce risk and increase returns.
  5. Implement and review: Put the plan in place and review asset performance and market conditions. Adjust the strategy as needed to respond to changes.
  6. Review and refresh: Review your management strategy regularly to ensure it’s still on track with your goals and market conditions.

Takeaway

A strategic asset management plan is the key to optimising your investments, managing risk and achieving long-term financial stability. By setting clear goals, reviewing your current assets and adapting to market changes, you can create a successful plan that will succeed.

If you want to go deeper into this process and improve your decision-making skills, Imarticus’s Chief Financial Officer course could be the next step in your career. Don’t give it a second thought! Opt today.

Frequently Asked Questions

What is asset management?

Asset management is the process of planning and investing to grow wealth, reduce risk and achieve goals. It is generally used in the strategic allocation of assets like stocks, bonds or real estate.

What is asset liability management (ALM)?

ALM is about balancing an organisation’s assets and liabilities to manage risk, including liquidity and interest rate risk, to be stable.

What is asset liability management in banks?

In banks, ALM deals with liquidity, interest rate risk management and matching of asset and liability duration to be profitable and compliant with regulations.

 Why is asset management important?
Asset management optimises returns, manages risk, diversifies investments and adapts to market conditions to help individuals and companies achieve long-term financial success.

How Technology is Reshaping Asset Management Practices and Enhancing Decision-making

Asset management has never been a static field in finance, and response to the shifting economic environment and changing expectations of investors. As we enter the 21st century, technology becomes the wind in the sails of asset management practices. It is remodelling the approaches to managing and deciding assets and giving new tools that promise to create better and more efficient investment strategies.

The Technological Transformation

Onset of Fintech

Fintech, an abbreviation of “financial technology,” is a revolution in the asset management space. Fintech could be looked at as the map through which asset managers navigate the investment opportunity maze. Technology has integrated into financial services to improve the conventional methods of asset management but also shakes up the status quo. Innovations come in the way of streamlining processes, reducing costs, and enhancing client engagement.

Technology in asset management, particularly in fintech, brings into play a fundamental change in the aspect of efficiency and changes in practice. Fintech makes finance technology to help as many operations as asset managers can further streamline, achieve reduced transactions, and come up with better decisions through data analysis applications. AI, blockchain, and machine learning interconnection allow asset managers to better assess and identify market trends and operate better portfolios with real-time insights.

In addition, technology in asset management makes it more accessible and enables managers to run routine matters like reporting, compliance, and risk assessment. Robo-advisors and algorithm-based trading systems democratized investment services such that the benefits of more affordable fees and personalized portfolios were transferred to the client. In mobile applications and online portals, engaged client tools connect portfolio performance with instant availability to individual clients so they can be involved and informed in the investment process.

Fintech’s impact on asset management shapes the manner of investing through efficiency, accuracy, and superior client experiences. Those asset managers who embrace technology will continue to stay ahead, adding much more value in such a competitive and rapidly evolving financial environment. In this regard, the role of technology is not merely an improvement but an evolutionary concept that changes the primary ways asset management operates.

Automation in Asset Management

Automation in asset management is the same as having a tireless, highly efficient assistant who works day and night. Fueled by technology, this method revolutionizes the industry because it is accurate when dealing with repetitive and time-consuming activities. For example, portfolio management and trade execution are streamlined using automated systems to process transactions at lightning speed without much error. Robo-advisors and algorithmic trading systems are driving this change. Robo-advisors utilize complicated algorithms to provide individualized investing advice, whilst algorithmic trading systems conduct trades based on preprogrammed criteria. Algorithmic trading systems can sometimes optimize trading strategies in real-time.

The inclusion of automation in Asset Management reduces the scope of human error. From an overall effectiveness standpoint, any asset management practices are remarkably enhanced by automation. Asset managers will also have fewer mundane administrative tasks to focus on because automation will allow them to address more strategic decision-making. However, there are weaknesses to this shift. The reliance on automation in asset management also leads to the displacement of jobs because machines are taking up roles heretofore delineated as human. The dependence on technology also means higher vulnerabilities in systems and a greater need for robust cybersecurity measures. Once more, despite these drawbacks, the advantages cited from increased efficiency and accuracy will have the waves of automation ride through the reins of the future of asset management.

Artificial Intelligence and Machine Learning

AI in Asset Management

AI is the brain behind most of the current cutting-edge asset management tools. Through AI, asset managers can now tap into predictive analytics regarding trends in markets to optimize their portfolio management. It is like having a crystal ball by your side based on data that lets you see what’s coming down the market channels well in advance, thereby making better decisions.

Machine Learning Applications

Machine learning is one of the siblings in AI, teaching the computer how to learn from experience. Pattern recognition in massive amounts of data helps assess risk better and frame an investment decision. It’s almost like having an experienced investor who continually learns and adjusts the game with new data and market conditions.

Big Data and Analytics

Data-Driven Decision Making

Big data has become the treasure chest for asset managers. With Big Data sources now providing deep insights about the trends of investments, like the financial news on social media and transactions in the market, asset managers can now perform sophisticated analytics to separate worthless garbage from useful information to make much better predictions and more informed decisions.

Enhanced Predictions

Big data delivers advanced predictive analytics, both current real-time views for timely decisions and long-term for strategic planning. It’s like having a high-definition map that shows your current location and potential obstacles and opportunities along your investment journey.

Blockchain Technology

Understanding Blockchain

Blockchain technology implies a digital ledger in which records of transactions are easily retrievable in a secure and transparent manner. Recently, blockchain has been of great interest to asset management due to the fact that blockchain is usually applied to increase transparency and security while easily tracking the realization process of transactions.

Benefits of Blockchain

Blockchain has many advantages. The transparency feature ensures a record of visible transactions that cannot be altered; thus, security ensures there is no room for fraud and cyber attacks. For your imagination, blockchain can be compared to a safe where every transaction is written down and protected with maximum care.

Cloud Computing Integration

Asset Management Systems in the Cloud-Based

Cloud computing helps transform asset management into solutions that are scalable and flexible. With this in mind, some of the merits that cloud-based systems present include cost-effectiveness, access, and collaboration. Consider cloud computing as your virtual office, one that you can easily access from anywhere, and that allows for seamless management and information sharing.

Trends in Cloud Computing

However, it has much more to offer for next-generation asset managers and will continue to evolve with new solutions. In the future, edge computing and AI integration will push cloud-based systems to newer heights.

Impact on Investment Banking

Transformation of Investment Strategies

Technology has drastically changed the face of investment strategies, making them quicker and more personalized. Technology now helps precision while implementing asset management strategies that could tailor investment products to the client’s requirements. It’s just like getting a ready-to-wear suit perfectly fitting you, sculpted to the colour of your investment profile.

Relevance of Investment Banking Course

Courses like CIBOP (Certified Investment Banking Operations Professional) do a fine job of equipping professionals to confront the steady tide of technological changes that impact their field. To keep investment banking skills always on track with the best, latest tools and trends in the marketplace, they must learn to stay abreast of a rapidly evolving discipline. One such investment banking course is Imarticus Learning’s CIBOP (Certified Investment Banking Operations Professional) program, which offers 100% job assurance with salaries up to 9 LPA in just three months.

Challenges and Considerations

Cybersecurity Risks

As the technology itself grows, risks are surfacing. The threats include data breaches and cyberattacks, but asset management security measures must ensure they protect sensitive information and investors’ trust for an extended period.

Regulatory Compliance

With a lot of technological changes arising each day, regulatory compliance forms another challenge. Asset managers must be aware of legal requirements and adapt them to the new state of affairs.

In the future, there will likely be regulations on new technologies, ensuring that innovation finds balance in protecting the investor.

The integration of technology in asset management practice is changing the industry’s nature, improving decision-making outcomes, and refining efficiency. As we go from AI and big data to blockchain and cloud computing, greater knowledge about these developments and the impact of such changes would be critical for asset managers seeking to be competitive and effective.

#KnowledgeBytes: Asset Classes!

In this video by Imarticus Learning, we will learn about asset classes. It explains the definition, features, and types of asset classes. The most popular asset classes are equities, bonds, cash, and commodities. Some uncommon asset classes called alternative assets to include real estate, art, and stamps.

The video also elaborates on these asset classes along with examples. Check our complete #ImarticusPrograms playlist here: https://bit.ly/2JP52hM

Why Imarticus?

Imarticus Learning offers a comprehensive range of professional Financial Services and Analytics programs that are designed to cater to an aspiring group of professionals who want a tailored program on making them career ready.

Our programs are driven by a constant need to be job relevant and stimulating, taking into consideration the dynamic nature of the Financial Services and Analytics market, and are taught by world-class professionals with specific domain expertise.

Headquartered in Mumbai, Imarticus has classroom and online delivery capabilities across India with dedicated centers located at Mumbai, Bangalore, Chennai, Pune, Hyderabad, Coimbatore and Delhi.

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What Are The Types of Trade Settlement in The Trade Life Cycle?

Understanding Trade Settlement

The evolution of finance and commerce as a whole has pushed the world economies to a new high. With the advent of trading of financial instruments and multiplier effect into action, the monetary growth has been multiple folds over the past few decades.

Let’s get deeper into what exactly is trade settlement and how does it function. Trade settlement is a transaction method wherein the securities in trade are transferred into the buyer’s account and the monetary value of the security is deposited into the seller’s account post a trade execution.

The securities traded are financial like bonds, stock futures, or other financial instruments of value. The date when an order is placed is known as trade day whereas the transferring of security and cash takes place on the settlement day.

The trade settlement in the trade life cycle process is a part of a bigger whole which we call the trade settlement period.

The trade settlement period incorporates the whole time taken to complete the trade, starting from execution to settlement of the trade.

Types of Trade Settlement 

During trading of financial securities, the time period for settlement of trades, trade capture is set as per the contract. The general time frame differs as per the types of securities. Equity securities are settled on T + 2 days, here ‘T’ is the trade date. Other securities such as commodities, currencies, or derivatives are traded at the mark to market, the settlement for a mark to market is at T + 2 days.

The classification of Trade settlement can be done into 3 types:

  • Normal/ Rolling Settlement
  • Trade-to-Trade Settlement
  • Auction

Rolling Settlement

In this type of trade settlement, securities are settled on successive dates based on the settlement period in the contract and the day when the trade was executed. So let’s take a trade contract period with T + 2 days settlement time, here if a trade is placed on Monday and another trade is placed on Tuesday, the trade on Monday will be settled on Wednesday and the trade executed on Tuesday will be settled on Thursday (successively).

This is different from the account settlement method wherein the trade executed within a given time period is all settled at once.

Trade-to-Trade Settlement

In the Asset allocation, Trade to Trade Settlement method, intraday trading in prohibited for securities falling in this segment.

 

In this type of settlement method, the trader is required to accept the delivery of the security when bought and provide the monetary value, while selling the trader has to deliver the securities and the monetary value of the same will be provided to the trader for the securities traded. In short, shares are traded only for delivery.

Auction

Any trade involves at least two parties to the transaction, in the trading of financial securities, on one side we have the buyer of the security on the other side we have the seller of the financial security. The auction takes place when the selling party of the transaction or trade fails to deliver within the given time period on the agreement of selling the security for the said or agreed upon the monetary value of the security. It’s a kind of penalty for the investor’s carelessness while trading.

In this case of failure the broker of the selling party will try to purchase the security in a buy-in-auction market, the sum of the auction price along with the penalty and brokerage charges has to be paid by the defaulter (the selling party). The settlement of the action is done on T+3 days given the broker tries and purchases the share in the auction market on T + 2 days.

 

A Beginner’s Guide to Asset Management Allocation in Trade Life Cycle!

What is trade?
Trade is an exchange of items within or outside the country. Trade has two elements: Buying and Selling. The catalyst which makes this buying-selling process hassle-free is money. In earlier times, people used to exchange the goods they have for the commodities which were owned by other people but today, you cannot separate money from trade.

Trade, as we know, is a process. And as every financial process involves a lot of assets, trade also makes use of the same. People who are trained with a proper PG Diploma in Banking and Finance can do this asset allocation with a lot of ease.

Stages in the Trade Life Cycle
In a globalized economy, trade is a continuous process. Exchanges take place now and then. Mentioned below are the prominent steps involved in the trade life cycle. With capital market training, you can understand each step involved with much more ease.

  • Sales

The process of Sales starts when there is a demand for a good or service. It starts with the seller and ends with the buyer. By this process, a client is acquired and then is provided by multiple buying options
E.G.: Various investment avenues that are available with an Investment banker. Such investment tools are curated according to the needs of the investor and then presented to him in the form of Hedge funds or mutual funds to the client.

  • Trade Initiation and Execution

Once the investor or the buyer selects the product or service he likes and places the order with the seller, the process of trade begins. Trade begins when there is a monetary exchange and even if the buyer asks the seller to give various quotes for his product (As in the case of huge deals). As soon as the order is placed by the buyer and it gets accepted by the seller, the trade is said to be executed.

  • Trade Capture

The real challenge starts once the order has been placed. It percolates down to several channels that use various assets to get the job down. Assets such as a bank, commodity, etc. have to be allocation right and quick to deliver the trade experience smoothly.

This process can be made efficient by proper Asset Management courses. Trades are then recorded in the whole operating system and are also brought into the Risk management system which will help in reducing risks associated with a particular deal and maximize value.

  • Trade Validation and Enrichment

The trade is then validated by several teams and various sets of parameters. Various stable and dynamic parameters are considered and are validated before the actual trade takes place. Assets such as currency have to be allocated and depreciation sand appreciation parameters have to be brought into the picture.

  • Trade Confirmation

This step is one of the most important steps of the Trade Life cycle. Various confirmations are made by both the parties in terms of delivery and payment of the products or services involved in a trade settlement. All of this is done at least a day before the settlement takes place. This provides a window to both the parties to make necessary changes to the trade deal.

  • Trade Settlement

This is the step where the commodity or the service gets delivered to the buyer. The buyer gets the required in exchange for cash. Also, buyers get security in exchange for cash. If the case is of derivatives, a particular currency is also delivered in return for some other currency.

  • Reconciliation

This step involves the bookkeeping and recording of transactions to meet the necessary accounting details of both the buyer and the seller. This also involves vouching, matching ledger accounts, etc. With effective training in the Certificate course in Banking and Finance and various asset management courses, this process can be made much easier and convenient to implement.

Bank Innovation Through Collaboration, Its Better Together..!!

Bank Innovation Through Collaboration, Its Better Together..!!

Bankers have used a number of strategies to gain competitive advantage the chief weapons being localization and scale of operations. Do you know that in the US of the 7,000 odd banks only 1.5 percent of the players command control over 75 percent of the deposits and 81 percent of the loans? GDPR and PSD2 are all set to transform the banking industry by empowering the customer with multi-dimensional power over their personal data in 2018.

The future of banks and their success is to reply to the regulatory and technological disruptions through a strategy aimed at value-added relationships with fintech enterprises, e-commerce platforms, and companies like Amazon, Google, Facebook and more. This will ensure they still get multivariate data for their systems to carry out their functions while they offer their clientele a more holistic improved experience since the regulations will check the growth of banks. The capital market course shows that the well-run and capitalized new-age midsize and small banks are among the survivors in the race for survival and staying competitive.

Will the mere strategies of being local and scale of operation in cashing in on local markets be sufficient for banks to survive? Let’s explore why it’s different now.

The Commodity trap:

The same basic model of banking has survived for centuries now. Banking had become an essential service that had no real threat of substitution, till it was at disrupt just 5 to 10 years ago when tablets, smartphones, broadband connectivity and other concepts of AI, data analytics and ML slowly and surreptitiously crept into our lives. The banking disruption in banking is only just beginning and it appears to have fallen into a commodity trap.

The essential features of a commodity trap as defined in the book by Beating the Commodity Trap authored by Richard D’Aveni and applicable to the capital market course state that the concept applies where,

  • Business insights and process knowledge are distributed widely as in a bank with many branches.
  • The moving of products from the manufacturer to producers occurs with very low costs as in the banking services and charging of high fees for sub-par customer service.
  • The lifecycle of product s is short before a newer version replaces it.

The Collaborative Advantage:

The banking industry is burdened by regulations and compliance measures that focus on mitigating and avoiding risks. Established enterprises prefer to protect their territories of customers rather than collaborate and better the customer’s journey. And the time has come for the risk-averse banking sector to open its doors to collaborations with vendors, customers, and even other banks to stay afloat and make a bid to increase their customer bases. Managing the past results and protecting their revenues will lead nowhere if the focus on future outcomes is overlooked.

The regulators have a point in reinforcing compliance and this is especially good in the areas of credit underwriting and capital management. But, risks will have to be taken in small doses of improving customer experiences, innovating with new products customized on needs of clients, and bringing in new on par services like the leading ASIPs and PSIPs to counter the falling into the commodity trap.

It’s Better Together

Innovation in the banking sector should move towards more collaboration, beyond a single business line, and should include a more brainstorming capital market course for new ideas inside the bank. Events from the likes of Finovate, Bank Innovation, Innotribe, and NextBank prove the smaller firms globally have no legacy systems or models to protect and are hence more innovatively involved in newer products and services. The National Science Foundation’s Business Research and Development Survey show that large firms (with more than 25,000 employees) spent less than 40 percent in R and D which is down by 30 percent for the period 2001-2008.

The Bank Innovators Council is akin to the “FinTech” incubators and even when they do not have the same forums its good to go with an old African proverb that states when you want to go quickly you walk alone and fast. But if you need to go far buttressing the point that innovation badly needs the banks to introduce idea connectors, network enablers and such measures on a war footing.

In conclusion:

While innovation may be frightful to risk-averse banks it has the potential to lead to effective collaborations, generate revenues and better customer service and interactions.  If you would like to learn all about the remedial measures being taken up by banks it is time to do a capital market course at Imarticus Learning where the future of emerging technologies is well-taught and packaged with career-ready skills.