A quick introduction to Asset Management with Charlotte Burrows, Analyst

I work in asset management….

A few years ago, I asked my non-finance friends for the first thing that came to mind when they thought about asset management. I got: the FTSE 100, Wolf of Wall Street, and lots of ‘I genuinely have no idea’. None of them suggested anything to do with what I experience in asset management on a daily basis – researching about the world around me and investing in interesting opportunities. So, let’s break down the reality of what this industry involves.

What does that mean?

‘Asset management’ sounds super broad, and it is! But it fundamentally comes down to one thing; trying to maintain and grow wealth. It is the role of asset managers to look after their clients’ money. This money can come from personal savings or inheritance, but mostly is made up of pension savings. An asset manager will choose assets in which to invest these savings to match their client’s financial needs.

For example, you’ve started your first job and are paying into your monthly pension. Your company will choose a pension manager, and this pension manager will invest this money for you into assets.

What is an asset?

So, what is an asset? Assets are anything that are perceived as a store of value and can be bought and sold. This can include: property (‘real estate’), part ownership of a company (‘equity’, ‘stocks’, ‘shares’), or ownership of an institution’s debt (‘bonds’, ‘fixed income’). Currencies and commodities such as gold and cash are also assets, as well as art, jewellery and wine! Individuals will buy a Picasso today because they believe it will be worth as much, and hopefully more, in the future. The hope is that assets appreciate in value and/or generate some income. An art collector wouldn’t buy a Picasso today if they didn’t think it would be worth at least as much in the future.  

These asset groups, referred to as asset ‘classes’, all have different characteristics, primarily referring to their risk and return profiles and how you expect them to perform in different economic environments. 

You don’t need to access your pension until retirement, a long way off! So your pension can be invested into something that might be hard to sell quickly (called illiquid), such as property. Or, it can be invested into companies that may be small but have a long growth trajectory, such as start-ups backed by venture capital. AirBnB, Spotify and Uber were all very small companies at one point, that relied on investors to help them grow.

Asset managers include those who both advise clients on how to manage their money as well as investment professionals making the financial market trading decisions.

Investors will focus on looking after funds that will invest in these asset classes, each fund having a specific purpose. This purpose can be financial (e.g. to pay you a % income on your assets), or non-financial (e.g. to invest in sustainable opportunities). 

Investing in companies that are doing good for the planet is a growing area of asset management. Funds that do this are often called ESG (‘environmental, social, governance’) funds, because they pay particularly attention to the effects of the company on these areas. They are doing social good at the same time as making a financial return.

An asset manager may be a portfolio manager with a multi-asset focus, allocating their client’s capital amongst the different asset classes, or they can specialise in a certain asset or region. For example, a UK equity portfolio manager will invest only in UK companies. Thousands of companies are listed in the UK, from HSBC to AstraZeneca to FeverTree; yes, by investing in the stock market you can potentially make returns from drinking G&T’s!

What sort of roles are there in asset management?

There are so many different people involved in the investment process: mathematicians and computer scientists developing quantitative algorithms, IT professionals, marketing teams promoting products, and lots of client-facing roles too.

Might it be for you?

Being an asset manager means being interested in the world around you and reacting to what is going on. The investment landscape is dynamic and ever-evolving, - Elon Musk’s tweets, Reddit and bitcoin are all relevant things to know about! But so is gene sequencing, baby formula and the energy transition.  

This large variety of positions and focuses is why the industry attracts a variety of people from different backgrounds. We need to make sure that this industry represents the diversity of the people whose money it is managing. Many of the best asset managers are women, and the next generation could include you!