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How Can Indian Investors Benefit from Asset Management?
Asset management is intended to cultivate market value for ownership to improve its returns, whether it is real estate or any other asset.
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An asset manager looks over assets on behalf of others, making critical investment decisions that help the client’s portfolio development. An asset manager also guarantees that the client’s investment does not devalue and that risk exposure is minimized. This entails keeping an eye on the market, remaining current on studies and trends, and keeping up with political, financial, and economic news.
Real estate can also be managed by asset managers. These specialists follow the same rules as asset managers in the financial sector. They specialize in optimizing a property’s value for investment purposes, as opposed to real estate property managers, who handle the day-to-day operations and physical structure of a property.
Read Also: All Your Burning Real Estate Asset Management Questions, Answered!
What is Asset Management in Real Estate?
In the real estate market, asset managers typically specialize in specific types of property, locations, or operations. The asset manager’s primary responsibilities include market research, data analysis, and revenue forecasting.
Leases and rental agreements must be written in a way that attracts tenants while also providing flexibility, reducing vacancies, and limiting liability exposure. Resources must be allocated strategically—poorly managed resources have a detrimental influence on portfolio value.
A property manager is often chosen by the asset manager. The asset manager focuses on financial concerns, whereas the property manager focuses on property operations. This relationship is critical in real estate investing, much as a corporation’s board of directors must work closely with its CEO or COO.
The overarching goal of asset management is to maximize property value and investment returns. This involves lowering expenditures whenever feasible, finding the most stable and substantial sources of revenue, and avoiding responsibility and risk.
Asset managers are, in some ways, entrepreneurs. Many choices in real estate asset management, such as negotiations, approvals, and lease analyses, necessitate the assumption of risks and the creation of predictions. Managers who use their financial resources in the most inventive ways are more likely to be rewarded with better earnings and larger portfolios.
What Is the Importance of Asset Management?
Asset management is important for businesses for several reasons, including:
- Allows a corporation to keep track of all of its assets
At its most fundamental, asset management entails understanding and keeping track of the assets owned by a certain firm. It enables businesses to track their operating and maintenance expenditures with the aim of identifying inefficiencies that may be improved. As a result, effectively recording this information will not only save the organization money but will also result in higher returns. The procedure makes it easy for businesses to keep track of their assets, whether they are liquid or fixed. Firm owners will be aware of the location of their assets, how they are being used, and whether or not they have been modified. As a result, asset recovery can be completed more efficiently, resulting in increased profits.
- Assists in ensuring amortization rates are accurate
The asset management process ensures that assets are accurately recorded in financial accounts because they are verified on a regular basis.
- Aids in risk identification and management
The process of identifying and managing risks associated with the use and ownership of specific assets is known as asset management. It means that a company will always be prepared to deal with any risk that may arise.
- Eliminates phantom assets from the inventory of the company
Assets that have been lost, destroyed, or stolen have been incorrectly recorded on the books in some cases. A strategic asset management strategy notifies the firm’s owners of any lost assets and removes them from the books.
- Maximizing Potential
Asset management assists businesses in realizing their full potential. Companies may maximize their company activities through appropriate management. They can also develop a better design for resource usage and implementation, which will go a long way toward ensuring long-term development and success.
Assets that have been lost, destroyed, or stolen have been incorrectly recorded on the books in some cases. A strategic asset management strategy notifies the firm’s owners of any lost assets and removes them from the books.
Also Read: Understand the Differences between – Investment Management Vs. Asset Management
Tips to develop an efficient Asset Management strategy
Asset ownership is an essential component of any public or private organization. A firm owner must design a strategic plan to properly manage the assets.
- Perform an asset inventory
Before doing anything else, an owner should make a list of all the assets he owns. He will not be able to manage his assets properly if he is unaware of the exact number of assets in his inventory. The following items should be included in a company asset inventory:
- Total number of assets
- Where are the assets located?
- The worth of each asset
- When the assets were purchased
- The assets’ anticipated life periods
- Determine the life-cycle expenses
If a business owner wants to be accurate with his asset management plan, he should determine the total life-cycle expenses of each asset. Many business owners make the mistake of merely calculating the initial purchase costs.
Additional costs, such as maintenance expenses, condition and performance modeling, and disposal costs, are expected to arise during the asset’s life cycle.
- Establish service levels
After calculating the life-cycle costs, the next step is to establish service levels. Simply said, it implies detailing the overall quality, capacity, and function of the various services provided by the assets. As a consequence, a company’s owner can determine the operating, maintenance, and renewal activities necessary to keep assets in excellent shape.
- Make long-term financial plans
A corporate owner’s asset management method should ideally transfer readily into long-term financial planning. With a solid financial strategy in place, the owner may determine which goals are achievable and which must be prioritized.
What do Asset Managers Bring to the Table for Private Equity Investors?
Third-party asset managers offer solutions to help private equity investors fulfill their goals of maximizing returns. They attempt to address the challenges that investors face in managing the operational, strategic, and financial aspects of their investee companies, as the latter are unable to obtain the necessary management information promptly and are concerned about fraud, misappropriation, or misconduct in their investee companies.
These asset managers serve as the eyes and ears on the ground for knowledgeable investors who understand that it is prudent to follow up on investments with regular monitoring of major business risks. They assist Private Equities in managing different risk factors and the issues outlined above. Because they are independent, these asset managers ensure that an unbiased, external perspective is incorporated into asset management protocol and that investors’ interests are protected and optimized without jeopardizing relationships between investors and investors.
So because the asset manager is independent and unbiased, he or she acts without regard for the history of the investments and brings to light the facts of the investments by acting as a bridge between the stakeholders. As service providers, they recognize the significance of each investment to the investors and recognize that every piece of information about the investment is significant. These managers serve as a watchdog, communicating crucial information and observations while also suggesting remedies to potential dangers.
Investors are generally in agreement that India is not a short-term play. Institutional investors are increasingly establishing long-term, strategic positions in the market to maximize profits on existing investments in India while also having a long-term, greater exposure.
Also Read: Understand the differences between asset management and wealth management
Engaging a local third-party asset manager with the necessary experience managing transactions and investments, as well as post-investment monitoring, is intended to ensure that the expectations of the various stakeholders in the investment cycle are effectively managed. When it comes to some vintage funds achieving their goal returns, the majority of FDI funds have yet to return even their capital to their investors.
When it comes to underperforming assets, asset managers may play a vital role in safeguarding or recovering value for the client. In many cases, the use of third-party asset managers has resulted in the simplification of information flow from investee firms to investors, as well as the improvement of investee firms’ finance vertical and risk management capabilities. The fact that these asset managers are unrelated to the investment, the investor, or the investee increases the credibility and independence of the monitoring process and fosters a constructive environment for information and ideas to flow among stakeholders.
Asset management is a procedure that assists businesses in keeping track of all of their assets, including cars, equipment, and investments. Keeping track of assets helps to streamline processes, especially when it comes to selling or disposing of them. Because all accessible assets are adequately accounted for, the procedure also reduces the possibility of registering ghost assets. Assetmonk is a WealthTech Platform that provides asset management facilities in Hyderabad, Chennai, and Bangalore with IRRs ranging from 14 to 21%. Our commercial real estate investment products are divided into three categories: Growth, Growth Plus, and Yield. Visit our website to learn more about real estate investment and our services!
Asset Management FAQ’S:
What is asset investment management?
In finance, asset management refers to the management of investment portfolios. The assets in this portfolio will be managed by investment banks or individual asset managers, who will limit risk while increasing value.
Is asset management the same as investment management?
Investment management describes the use of instruments and procedures to achieve good returns, depending on whether the individual is risk-averse or risk-tolerant. Asset management, tax planning, estate planning, insurance, retirement planning, education, and philanthropy are all examples of this.
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