Asset management and investment management are two common terms in the financial industry, and many people use them interchangeably. However, there are some key differences between the two concepts. In this article, we will analyze the core differences between asset management and investment management from various perspectives including business focus, target clients, products & services, etc. A clear understanding of their similarities and differences can help us better comprehend the financial market.
Asset management focuses more on investment decisions while investment management cares more about overall wealth management
The core business of asset management companies is investing money on behalf of their clients. Their investment managers make investment decisions to generate returns. On the other hand, investment management firms provide more comprehensive wealth management services to high net worth individuals. Investment management is only part of their offerings. Their focus is on the overall management of client relationships rather than just investment activities.
Asset management companies serve wider range of clients compared to investment management firms
The clients of asset management companies range from institutional investors like pension funds and sovereign wealth funds, to high net worth individuals, and also retail investors. Investment management firms, however, mostly serve high net worth individuals who need tailored wealth management solutions. The relatively narrow target market results in smaller AUM size for investment management firms.
Asset management companies offer investment strategies while investment management firms provide customized solutions
Asset management companies provide well-defined investment strategies to their clients. These strategies can come in the form of mutual funds, ETFs, or separately managed accounts. Investment management firms usually act more like an investment platform. They offer a bundle of customized solutions to meet specific client needs, which may include trading services, portfolio management, financing solutions, wealth planning, etc.
In summary, asset management focuses on investment activities and serves diverse investors, while investment management cares more about overall wealth management especially for high net worth individuals. But the boundaries between the two concepts may be blurring as asset management capabilities become increasingly important for investment management firms to retain client assets and generate stable revenue.