What do asset management companies like BlackRock and Goldman-Sachs actually do?


The title says it all.

Despite looking at the wikipedia page, I’m still left feeling like I missed something. It seems like investment companies are pointless, but I know little about their actual day-to-day functions.

For example: “enterprise risk management” is listed as one of BlackRock’s specialties; as a working-class layman, this is hard to make any connections to. Is this just funding? Do they perform any duties similar to a bank?

In: 0

Well, if you take your money into Goldman, and you tell them “I’d like you to manage my assets,” they put your money into a brokerage account and do stock trading actions in line with how much risk you’d like to take and how much money you’d like to make. It’s kind of like a 401k but with a personal lapdog who you can call up and complain to about recent transactions (your broker).

The enterprise risk management part of your question is something I’m less familiar with, but general “risk management” is basically applied statistics and economics wherein actuaries calculate how much “risk” (how much money you can lose) is inherent in your business and then give recommendations on how to reduce this risk.

Big investors – banks, governments, and other institutions – don’t just want their investment to grow. They often have very specific investment objectives. A pension fund might want its money to grow enough to keep pace with inflation, but not to be too risky because they don’t want to lose money either. Other investors might be much more growth-oriented, and want a much higher rate of return, in exchange for accepting a higher level of risk. Others still might have a specific timeline on their investment, so they’re willing to be a little riskier up front, but more conservative when the end date is approaching.

Investment bankers in the asset management field select a and purchase a portfolio of investments that suits the objectives of the investor and their tolerance for risk, and actively manage that portfolio. That’s where risk management comes in – risk is not something that is always easily quantified, and a good manager needs to be able to assess the risk environment and make sure they’re getting it right.

Feels like I should link the scene in wolf of wallstreet where Mathew McConnehegh tells Leo about how it works.
You take the money from their pocket and put it in yours.