With the continuous development of the financial industry, asset management and investment management have become more and more important. However, many investors are still confused about the difference between the two. This article will analyze their definitions, business focuses, profit models, and regulatory requirements, and summarize the core difference lies in who owns the assets managed. Through comprehensive analysis, investors can gain a clearer understanding of asset management and investment management.
asset management focuses more on portfolio management and operations
Asset management refers to professional management of assets for clients. Asset management companies help clients like pension funds, sovereign wealth funds, high net worth individuals manage their investment portfolios. The assets still belong to the clients legally. Asset managers earn fees based on the size of assets under management. They focus more on portfolio management, daily operations, risk control of clients’ assets.
investment management centers around investment research and strategies
Investment management refers to the professional asset management through investing activities. Investment managers like mutual funds and hedge funds do investment research and design strategies to earn returns on the assets. The assets are legally owned by the investment management firms. They earn profits from the investment returns. Research and strategies are vital to investment managers.
asset management has more stable fee-based income
The profit model is a key difference. Asset management companies earn management fees based on the asset size, so the income is relatively stable. While investment managers’ income fluctuates depending on the investment performance. Good performance can bring performance fees, but bad performance means loss of profits.
investment management faces less regulations
Asset management companies need to be regulated as they manage assets for clients. Investment managers have more flexibility as they invest their own assets. But the increasing size of investment firms also leads to tighter regulations in recent years.
The core difference between asset management and investment management lies in who owns the assets. Asset managers earn fees managing clients’ assets, while investment managers earn returns investing their own assets.