Asset Management

 

Asset Management 

Asset management is investing clients’ money in the right assets to ensure optimum returns. Asset management companies (AMCs) make investment decisions on behalf of their clients. These companies usually serve huge organizations like insurance companies, pension funds, sovereign wealth funds, and High-Net-Worth Individuals.

Asset Management follows these predetermined risks parameters and investment strategies. For these services, asset management companies charge enough in fees.

 Asset Management System:

An asset management system is a framework that facilitates the use of various business software, applications, and infrastructure to strategically plan and manage assets. The system focuses on optimum returns and balancing risks. In other words, it simplifies the tracking of corporate assets, their condition and facilitates better planning. An asset could be finance, property, plant, equipment, IT, or personnel. Ivanti, GoCodes, Asset Panda, and InvGate are the popular software used for managing assets.

 

Asset Management Process:

§  First, existing assets are assessed. The need and purpose of a portfolio are determined.

§  The condition of existing assets is diagnosed to determine if they meet financial objectives.

§  Next, the extent to which the assets realize their purpose is ascertained.

§  The feasibility of future endeavours is determined. Based on future demands, the need for new assets is identified.

§  Then asset managers analyse asset lifecycle and efficiency to ascertain a maintenance cost.

§  The depreciation rate of the assets and their overall impact is evaluated. The potential risk associated with each asset is quantified.

 

Types:

1.      Financial Asset Management (FAM): It refers to the strategic allocation of funds into various financial market instruments like investment funds, stocks, bonds, futures, and derivatives.

2.      Fixed Asset Management: Companies require property, plant, machinery, equipment, and other fixed assets for their functioning, the regulation of these assets falls under this category.

3.      Infrastructure Asset Management: The facilities that ensure connectivity and accessibility act as assets for a nation. These include roads, bridges, transportation, internet, electricity, and telephones. For infrastructural assets, managers focus on the development, improvement, and replacement of amenities.

4.      Real Estate Asset Management: These Asset Management Companies direct financial resources into buying or construction of commercial properties.

5.      IT Asset Management (ITAM): Information technology is an inseparable component of the corporate world, and this discipline handles software and hardware assets. This includes computer systems, patents, licenses, applications, and networks.

 

Importance:

1.      Selection of Appropriate Investment Vehicles: The primary role of an AMC is determining ideal investments. AMCs also determine which assets should be avoided.

2.      Risk Diagnosis and Moderation: Asset managers check the level of risk involved in an asset portfolio and take measures to reduce it.

3.      Overall Asset Evaluation: AMC reviews all tangible and intangible assets from time to time. This way, they are updated on what their usable assets are.

4.      Eliminating Dead Assets: Asset managers are always aware of when assets exhaust. Exhausted assets only hold a place in the accounting books and have no usability in the market. But these entries keep the financial records realistic.

 

 

V.S.Srikrishna (20UCM091)

 

III B.Com ‘B’