Commercial Connotation of Asset Management


Bethany Walsh

Sep 30, 2021

Commercial connotation and regulatory extension of asset management

Asset management, commonly known as "entrustedbythefinancialmanagement ", originated from the securities investment fund in Britain in the mid-19th century. It provided the new British middle class with opportunities to share the wealth growth brought by the industrial revolution and overseas expansion. Half a century later, securities investment funds rose and developed rapidly in the United States. Unexpectedly, they suffered heavy losses in the great depression from 1929 to 1933. Since then, the United Kingdom and the United States have respectively imposed supervision on public securities investment funds. Among them, the Investment Company Act of 1940 and the Investment Advisors Act of the United States have constructed a dual regulatory legal framework. The former aims for public securities investment funds, and the latter aims for fund managers and other people who provide paid securities investment advice or consultation to the public. As a part of the direct financing system, fund supervision constitutes a part of the securities supervision system. The dual track supervision mode of American "public fund (product) + investment advisory (advisor)" has also become a model for countries to follow in the future.

After the 1980s, the market pattern and supervision mode of asset management have undergone profound changes. In addition to specialized fund managers or investment consulting institutions, banking, insurance, securities and other financial sub industries are involved in asset management services, and the name "big asset management" is worthy of the name. In the financing chain of the financial market, "big asset management" is embedded between the terminal providers of funds and financial intermediaries, and runs through various financial sub industries. This is because although the initial functions of financial intermediaries such as banks, securities companies, insurance companies and futures companies are deposit and loan, underwriting securities or providing insurance respectively, yet with the growth of personal wealth, the customer stickiness brought by the professionalism of financial institutions will inevitably promote them to participate in investment consulting, customer financing or asset management, and the customers will bear the investment risk. It is in this sense that big asset management has gradually become the single largest field in the whole financial service system.

Accordingly, the traditional separate regulation has shifted to functional regulation, and the "big securities law" or capital market law / financial service law is booming. The traditional business and asset management business of financial institutions are subject to banking / securities companies / insurance supervision and asset management supervision respectively.

At the micro level, all links of the asset management process have been reshaped: on the capital side, institutional investors such as insurance funds, pensions and enterprise annuities have replaced individual investors as the main principals; The traditional fund sales link is divided into customer-centered investment advisers, and the wealth management or financial planning function which helps investors allocate assets is gradually separated from the traditional investment management function; On the product side, in addition to the traditional public securities investment funds, private securities investment funds or hedge funds, as well as PE, VC, REITS and other alternative investment funds are becoming more and more popular. Accordingly, after the 2008 financial crisis, managers of hedge funds, PE funds and other private alternative funds have gradually been included in the regulatory territory.


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