Back in 2002, the total value of financial assets in the UK was estimated to be a relatively paltry $9.5 trillion (£7.21 trillion).
However, this sum has nearly quadrupled over the course of the last 20 years, peaking at nearly $36.4 trillion (£27.6 trillion) as recently as 2020.
Of course, this sum includes multiple assets that are held by the same investor. But what are the challenges faced by investors who hold multiple assets, and what strategies can be used to manage such assets?
What are the Challenges of Managing Multiple Assets Simultaneously?
There are multiple challenges associated with managing multiple assets at once, starting with operational risk management.
Certainly, operational and administrative inefficiencies represent a huge risk, particularly when you consider the impact of human error. Such issues can be particularly prevalent when launching new products or establishing funds, in addition to validating and cleansing accounts or attempting to extract important investment data.
Another challenge exists in the form of scaling and expanding your portfolio, as accommodating growth or diversification may prove challenging. The reason for this is simple; as over-diversification provides a risk if you’re unable to regularly rebalance your portfolio, while a lack of analytics can also prove problematic over time.
Record keeping is also a significant issue, particularly as a deceptively large number of investment firms continue to rely on spreadsheets. This makes it hard to maintain accuracy and address controls, while incorporating new data seamlessly may also be hard to achieve.
Of course, the process of digitisation is also not without its challenges, and it’s important to factor these in when managing multiple assets.
The Best Strategies for Managing Multiple Assets
Now that we understand the challenges associated with multiple asset management, the question that remains is what strategies can be deployed to help overcome these? Here are some ideas to keep in mind:
- #1. Conduct an Audit of your Assets: We spoke earlier about the importance of regularly rebalancing the assets within your portfolio, and this requires you to conduct a comprehensive audit. Without this and a wider understanding of the relevant market conditions, it’s impossible to create a viable management strategy that enables you to optimise the value of your assets.
- #2. Liaise With an Established Investment or Wealth Manager: The complex and fluid nature of investment management means that you may need help, both in terms of building a successful portfolio and managing this as it continues to scale and diversify. This is particularly true if you’re a novice investor, who needs to understand the importance of balancing assets against the backdrop of a changing marketplace.
- #3. Understand Key Performance Indicators: In order to react and adjust your portfolio successfully, you first need to be able to appraise its performance. More specifically, it’s important to understand whether your assets are performing better or worse than the market average, so that you can react accordingly. So, key performance indicators must be included in your asset management strategy, so that you can create clear metrics across the board.