What Is Asset Class Management?

Asset class management is a broad term under the larger umbrella of financial management in a business. This activity allows an individual or team to manage a company’s investment funds, often for a fee charged to consumers. The most common asset class management groups include alternative assets, equity securities, bonds, and commodities or indexes, though there are others. Large business organizations may have special departments for this financial management activity. Financial institutions that charge for these services usually separate the activities by type and charge customers accordingly.

Alternative assets are any asset class that does not have a standard definition or fall under an existing category. In most cases, these alternative assets include retirement funds or special accounts for wealthy customers. Here, the financial manager places money from the account into special investments in the open market in order to generate financial returns. When financial institutions offer these services, they can charge consumers on an individual basis. Private businesses may engage in these services on behalf of employees investing money into pension funds or other retirement accounts.

Equity asset class management is the process of reviewing equity securities and similar convertible instruments. Private businesses separate their securities by different groups, such available for sale, held for maturity, and others. The financial manager is usually responsible for dictating these groups to the accountants who make entries into the accounting ledger. Specific accounting rules must be followed in order for a private business to account properly for each of these asset classes. Financial institutions may not have to follow these specific rules, though other regulations are most likely there for accounting purposes.

Bonds and commodity asset class management focus on debt and real goods in which a company or financial institution may invest. These have separate asset classes as companies need to report these items to stakeholders differently than equity investments. Financial institutions have separate asset class management fees for these investments as the items may trade in different markets and have different fees for making trades. In many cases, these assets can be highly volatile and include much more risk based on the item in the investment. Foreign investments may also be possible here, meaning the company or financial institution needs to account or charge for these properly, respective to the asset class management.