Financial Risk Management For Dummies

Chapter 16

Managing Assets and Portfolios

In This Chapter

Looking at types of money managers

Focusing on funds and their management

Measuring value for risk and portfolio managers

This chapter covers the financial risks that asset management companies encounter. Asset managers are advisors, issuing buy and sell instructions on other people’s money. The financial risk belongs with the clients, not the asset manager. So you’re probably asking, ‘Why is there a chapter on asset managers in a risk-management book?’ The answer is that asset managers are fiduciaries and must manage the risk (and everything else) for the benefit of the client. The basic idea, although not in legally exact terms, is for the asset manager to treat the clients’ money as carefully as if it belonged to her. In real life, as an asset manager, you treat clients’ money more carefully than that; after all, you’re allowed to be haphazard with your own money.

Surveying Financial Institutions and Their Risks

Financial institutions take money in from customers, invest it, and use the proceeds from the investment to repay their customers. They differ primarily in when and how much money they give back:

• Banks promise fixed ...