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Subject 4. The Asset Management Industry PDF Download

The asset management industry is an integral component of the global financial services sector.

A sell-side firm sells securities, and provides independent investment research and recommendations to its clients, which are buy-side firms. A buy-side firm buys securities for the purpose of money or fund management.

Active management requires frequent buying and selling in an effort to outperform a specific benchmark or index. Active management portfolios strive for superior returns but take greater risks and entail larger fees. Passive management replicates a specific benchmark or index in order to match its performance.

Traditional asset managers focus on long-only equity and fixed-income strategies, while alternative asset managers focus on non-traditional assets such as hedge funds, private equities, and venture capital investments.

Most asset managers are privately owned, structured as limited liability companies or limited partnerships. Some asset managers are publicly traded now.

Industry trends:

  • Growth of passive investing, due to low cost and challenges faced by active managers to beat the market.
  • Use of "big data" in the investment process. The challenge is how to convert various forms of data into alpha-generating portfolio and security-level decisions.
  • Robo-advisers: an expanding wealth management channel. This is based on several industry trends, including growing demand from mass affluent and younger investors, lower fees and new entrants.

Learning Outcome Statements

e. describe aspects of the asset management industry;

CFA® 2022 Level I Curriculum, , Volume 5, Reading 48

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