There are as many organisational models as there are asset management companies. Each company adapts its structure to its individual characteristics, such as size and specialisation. However, there are two main activities in any asset management company: asset management and liability management.

• Asset management covers all of the investment-related activities of collective investment schemes (buying and selling portfolio securities: giving orders, trading, confirmation and supervision of orders, etc.) These activities are focused on financial management and constitute the core business of an asset management company.
• Liability management covers the activity related to subscription and redemption of collective investment scheme units by investors.

Market operations (meaning asset management) break down into three types of business: front office, middle office and back office. The back office, because of its involvement in fund administration, also plays a role in liability management, which in turn relies on the marketing and sales functions. All four of these main businesses are backed up by support functions (core business), including compliance, legal affairs and data management. Like any other undertaking, an asset management company relies on senior management and corporate services.

Asset management process

Front Office - Management

The front office is the core business. It is responsible for the financial management of portfolios, meaning the decisions to invest or disinvest. It is the manager’s responsibility to make these decisions. The manager implements the asset allocation and decides on the management style in accordance with terms of the contract and in accordance with regulatory requirements. The manager relies on the work of investment analysts (value analysis, business analysis, etc.) to reveal market opportunities. The manager relies on the trading room to execute buy and sell orders through brokers or on the markets. Traders often work from trading desks specialising in different assets (equities, bonds, etc.) The traders send the managers’ orders to brokers or counterparties and it is their job to obtain best execution.

Middle Office – Supervision

The middle office is responsible for the administrative aspects of the front office’s trades and transactions. The middle office checks and supervises the front office’s orders by comparing them with the trade confirmations from brokers and counterparties. The middle office also supplements orders with settlement terms and instructions. It also reveals the front office’s positions and monitors corporate actions. Once an order has been validated by the middle office, it is transmitted to the back offices of both the asset management company and the custodian. The custodian’s back office monitors order matching and settlement operations.
In some organisations, the middle office is also responsible for monitoring market risks incurred by the front office and portfolio performance calculations and reporting. However, the content of the middle office function’s activities can vary substantially from one company to the next.

Back-office

Fund Administration

The asset management company’s back office is responsible for fund administration, i.e. the accounting and valuation operations relating to portfolios, including calculating their net asset value. It also handles the legal formalities for the portfolios, such as registering the funds with the AMF and notifying any changes to them.

Liability management

The central registrar’s task is to monitor and execute all transactions affecting units in the collective investment scheme and to post them to the account on the holder’s behalf, as well as provide custody of the relevant assets, which means custody of the collective investment scheme units.

Centralisers receive all the subscription/redemption orders relating to collective investment scheme units sent in by distributors.

Marketing – Sales

The sales functions of an asset management company deal mostly with other financial intermediaries and distributors, rather than directly with end investors (except in the case of institutional asset management), since the distribution of asset management products is mainly delegated to other intermediaries, such as banks, insurance companies and independent investment advisers. These functions include the businesses and functions responsible for product range and brand management (marketing, promotion, etc.) and for research and development, in conjunction with fund managers, legal affairs and communications.

Support Functions

Senior Management and Corporate Services

Regulations require that an asset management company be managed by at least two persons. In smaller, entrepreneurial asset management companies, this function is often combined with that of manager and/or compliance and internal control officer. These functions also include the company secretary’s office, financial accounting and management control for the asset management company, along with human resources (general resources, training, etc.)

Support Functions (core business)

This is the group of businesses and functions that contribute to the smooth operation of the asset management processes. It includes internal control (compliance, best practices, etc.), which implements and enforces regulations and procedures, along with the legal and tax functions, which rely on lawyers and advisers to ensure the lawfulness of contracts and agreements and, working with internal control, the compliance of documents and procedures with legal requirements. In this structure, information technology (data management, etc.) and communications are also included in the support functions.

Furthermore, even though asset management companies are at the heart of the financial management business, other market participants also have a role in the efficient operation of the management process and the competitiveness of the industry. The asset management industry has a symbiotic relationship with a full range of businesses, which include depositaries, custodians, statutory auditors, assessors, performance-rating teams, to mention only a few. Academics and researchers working on economics and finance, along with regulators and legal professionals, are also part of the asset management environment.

Documentation

Les emplois dans la gestion pour compte de tiers - septembre 2008

Résultats de l’enquête réalisée par les services Recherche-Economie et Communication-Formation de l’AFG. Cette étude, première dans son genre, établit une nomenclature des métiers et dresse en termes quantitatifs un état de lieu de l’emploi dans les sociétés de gestion.

L’enquête menée a permis également d’estimer en détail le nombre d’emplois externalisés et ceux induits par l’activité des SGP dans l’écosystème (dépositaires, brokers, réseaux de distribution…).

Cette publication constitue en outre une source supplémentaire d’information sur la contribution de l’industrie française de la gestion à l’économie, notamment en matière d’emploi qualifié.

(AFG, septembre 2008, format Acrobat, 28 p.)