With the continuous development of financial markets, investment management and asset management have become two major professional services in the investment industry. Many investors are confused about their differences. This article will analyze their core differences from the perspectives of service focus, target customers, investment products, and business models, hoping to help investors better understand the positioning and value propositions of investment management and asset management.
Investment management focuses more on investment strategies while asset management provides more comprehensive wealth management services
The core business of investment management companies is investment. Their main goal is to help investors grow their assets through professional investment expertise and strategies. The investment team is at the center of their operations. In contrast, asset management institutions see client relationships as the heart of their business. They provide a range of wealth management solutions beyond just investment products, such as financial planning, financing services, asset allocation advice etc. However, they don’t invest money directly but act more as a platform to connect clients with investment products and services.
Investment management serves a wider range of investors while asset management focuses more on HNWIs
Investment management companies have a diverse client base, from institutional investors like sovereign wealth funds, pension funds, to ultra high net worth individuals. However, retail investors can only access their mutual funds and ETFs. Asset management firms mostly serve high net worth individual clients who need more tailored wealth management solutions. But some also provide services to institutional clients. The relatively narrow target market results in smaller AUM size for asset management firms compared to investment managers.
Investment management offers specific strategies while asset management provides more customized solutions
Investment management companies offer strategies to their clients. These strategies can come in different forms like mutual funds, separate accounts, indexed ETFs or unconstrained approaches. But the focus is always on a specific investment framework and strategy. Asset management institutions provide more flexible advisor services and packages to clients. This can range from brokerage, fund platforms, securities offerings, financing to wealth planning. The investment strategies they use are not self-developed but provided by third parties.
Investment managers earn fees through assets under management while asset managers through a mix of AUM fees and other services
As investment experts, investment management companies derive income from fees based on the assets they manage for clients. Their goal is to retain client assets in the long term through strong investment capabilities. Asset management firms earn fees both from investment management services and other non-investment offerings. With a more holistic service focus, asset managers are incentivized to address more aspects of a client’s financial needs beyond just investments.
In summary, investment management focuses on investment strategies and attracts a diverse investor base, while asset management provides more customized wealth management solutions mainly to HNWIs. Though asset management firms may offer investment services, their core value lies in the overall management of client relationships and wealth rather than just investment expertise.