An asset management firm vs private equity firm are both in the business of managing money. Learn how they still differ from each other.

The differences between asset management firm vs private equity firm have been confused by many people.

Although they exist to manage money, they do so in different ways.

Their key differences lie in investment focus (public vs. private), control (limited vs. significant), and liquidity (liquid vs. illiquid).

As an investor, you can use these two strategies to grow your money.

But if you don’t know how it goes, you can consult a full-service asset management firm like ITUS Capital for assistance.

Our team at ITUS Capital is aware of our firm’s fiduciary obligation to grow our clients’ investments in the fund.

In this article, we’ll focus on the differences between asset management and private equity to help you understand so you can make the right decisions.

What are Asset Management Firms (AMCs)?

Asset management firms handle investments for clients like individuals, pension funds, or institutions.

Their job is usually to put money into public markets, like stocks, bonds, mutual funds, and ETFs, aiming for steady returns while managing risk.

The fees are often based on a percentage of the assets they manage.

At ITUS Capital, we’re an independent full-service asset management firm established in 2017.

We manage the money of our clients across 10 countries.

What are Private Equity Firms?

Private equity firms carry out a special kind of asset management operation that focuses on buying private companies or taking public companies private.

The aim is to improve them and later sell them for a profit.

The money usually comes from wealthy investors or institutions who are willing to lock their funds in for several years.

They make money through management fees and a share of the profits.

What is Asset Management?

Asset management is the process of managing assets and resources to grow and increase their financial value over time.

It’s usually carried out by asset managers.

They ensure the growth of their clients’ financial portfolios over time by monitoring the purchase, procedures, maintenance, upgrade, and clearance of assets and securities through profitable methods. 

Asset management can be done by an individual by putting together their own portfolio.

As we’ve mentioned earlier, a financial professional manages investments on behalf of clients or an employer. 

ITUS Capital is one example of a financial professional firm.

The major goal of asset management remains the same, whether you manage it yourself or hire a professional service.

The primary objective is to create a diversified portfolio that strikes a balance between risk and reward, fitted to the investor’s risk tolerance, time frame, and financial goals. 

What Is Private Equity?

Private equity is a precise investment strategy under asset management. It involves buying an ownership stake in a private company.

It also means taking a public company private.

Private equity firms typically raise capital from established and accredited investors or very wealthy individuals.

The funds gathered are used to buy a stake in a company or sometimes buy it completely.

From there, the private equity firm takes full responsibility for managing and changing the company.

The end goal of a private equity strategy is usually to later sell the company at a profit and move on to a new opportunity. 

Private equity funds use different strategies depending on the level of risk an opportunity comes with, investment timeline, and other important factors.

Difference Between Asset Management vs Private Equity

Private equity firms invest in startup companies using their own money to buy company shares, then grow them to the point where they can sell the company for profit.

Asset management firms primarily invest in established companies, using public capital to buy shares and support their growth.

Either of them allows investors to make money through dividends or through the company’s final sale.

The key difference between the two firms is that private equity firms are basically acquisition investors.

They usually buy some or all the ownership shares in companies to increase their value over time.

But for asset managers, they mainly invest money on behalf of large institutions like pension funds and grants.

Also, private equity firms usually buy a share in the company and maintain their position for about three to ten years.

Asset managers focus more on investing, selling, and moving on within a much faster time frame.

Who Can Benefit From Asset Management?

You, as an individual, a business, or a government organization, can benefit from asset management.

These companies can leverage their assets and free up capital for use in other areas.

This option works for businesses that need money for certain projects but can’t reach their long-term goals through normal means, like bank loans or investors.

In some cases, companies can use asset management when they sell specific assets like real estate or machinery.

Who Can Benefit From Private Equity?

Many types of businesses are well-suited to private equity investments, including:

• Businesses with undervalued stock that require restructuring, whether through bank loans or other financial means.
• Smaller companies aim to grow by acquiring new business lines or developing new products.
• Companies have the potential to become great businesses with some tweaking and restructuring.
• Companies that are trying to accelerate growth and acquire new business lines.
• Companies that want to expand into new markets or acquire other businesses.

Private equity investing can be a good option because you can:

• Cut costs by streamlining their workforce.
• Acquire or acquire new companies or businesses.
• Hire short-term capital to expand their operation.
• Access new technologies.
• Acquire other businesses that can be a fit with their current operations.

Asset management and private equity can be good ways to invest, depending on what you want to achieve with your money.

At ITUS Capital, our qualified financial expert can guide you and help you decide which choice fits your needs best.

Conclusion

Private equity is a type of asset management, and it’s also a strategy to grow clients’ financial portfolios.

Asset management includes different strategies that allow the growth of clients’ portfolios.

Note that you can do asset management without private equity. But you can’t do private equity without managing the resources assigned for that investment.

At ITUS Capital, we focus on long-term growth, and our team has a shared commitment to growth.

Our responsibility is to grow our clients’ investments in the fund, and we’ve structured it to achieve that goal.

Don’t hesitate to reach out to us to manage your fund for you.