Portfolio management is a crucial process for investors seeking to maximise returns while effectively managing risk. By integrating key elements such as equities, ETFs, SICAVs and UCITS, portfolio management companies play a key role in defining long-term investment strategies. [1][2]. In response to changes in the financial markets, these companies adapt portfolios to align investments with the specific objectives of clients, choosing between active and passive management to meet different needs and preferences. [1][2].

In this context, choosing the right management company, whether a fund management company or an investment company, becomes a critical decision for investors. This article explores the definition of an asset management company, identifies who its typical clients are, examines the types of management offered and discusses the criteria for selecting the most suitable company according to specific needs. [1][2]. By understanding these elements, investors can better navigate the investment landscape and optimise their portfolios to achieve their financial goals.

Definition of a portfolio management company

A portfolio management company (PMC) is an entity specialising in the financial management of assets on behalf of clients, either individually or collectively [3]. There are several key aspects to this management approach:

  1. Mission and Services:
    • Growth of clients' money according to their objectives and risk tolerance, in exchange for remuneration [3].
    • Advice and expertise through a personalised management mandate [3].
    • Collective management through undertakings for collective investment (UCIs) for securities marketable in the EU, and alternative investment funds (AIFs) for securities marketable in France. [3].
  1. Types of UCIs and AIFs:
    • UCIs in the form of open-ended investment companies (Sicavs) or mutual funds (FCPs) [3].
    • FIAs, including specialised funds such as real estate investment trusts (société civile de placement immobilier) or capital investment funds (fonds d'investissement en capital) [3].
  1. Regulation and Digitalisation:
    • Regulated by the Autorité des Marchés Financiers (AMF) in France, requiring an AMF licence to operate [4].
    • Use of digital solutions such as Axiocap for unlimited business management and a global view of the portfolio [3].

These factors underline the professional expertise of asset management companies in diversified and controlled risk management, offering significant added value to their clients.

Who are the clients of a management company?

Typical clients of a portfolio management company include :

  • High net worth individuals and families These clients are looking for tailor-made management of their investments to meet specific financial objectives, while taking into account their risk tolerance. [9].
  • Small and medium-sized enterprises (SMEs) These entities call on asset management companies to optimise the management of their financial assets, benefit from professional expertise and gain access to diversified investments. [9].

The services offered by portfolio management companies fall into two broad categories:

  1. Individual management : Offers clients the possibility of entrusting investment decisions to professionals, ensuring a personalised approach based on each client's objectives and risk tolerance. [3].
  2. Collective management Portfolio management: Involves managing portfolios collectively through financial instruments such as undertakings for collective investment (UCIs) or alternative investment funds (AIFs), providing access to a variety of assets and diversifying investments. [3].

These services are designed to deliver added value to investors through expertise and risk management, helping them to grow their wealth in line with their financial objectives and risk tolerance. [3].

Types of management proposed

Portfolio management companies offer various types of management to meet the specific needs of each investor:

  1. Individual management [3]:
    • The management company provides advice and expertise through a management mandate, enabling it to make decisions on behalf of the client.
  1. Collective management [3]:
    • Organisation of funds for several investors, providing access to a diversified portfolio of assets.
    • Main investment vehicles: FCP (Fonds Commun de Placement) and Sicav (Société d'Investissement à Capital Variable).
    • The fund is managed in accordance with the investment guidelines set out in the DICI (Key Investor Information Document).
  1. Other forms of management:
    • Recommended management [7] The customer retains control while seeking professional advice.
    • Controlled management [7] A professional manages all or part of the portfolio according to a predefined strategy.
    • Mandated management [7] The professional takes full control of the portfolio, making all decisions in line with the client's risk/return preferences.
    • Free management [10] : Entirely free and personal management without any assistance.
    • Guided management [10] Subscription to a financial research service, portfolio monitoring, magazine or screener to find the best assets.
    • Profiled management [10] Suitable for people who simply want to invest in the stock market, with management options tailored to the investor's risk profile.

Criteria for choosing a management company

When choosing a portfolio management company, a number of criteria need to be taken into account to ensure the quality and suitability of the services offered in relation to the investor's objectives:

  • Company history and performance [13] :
    • Assess the company's past performance and its ability to generate returns.
    • Examine the company's stability and reputation in the market.
  • Experience and background of the portfolio manager [13] :
    • The skills and experience of the manager are crucial to effective asset management.
    • Look for managers with solid training and a track record of success.
  • Expenses and cost structure [13][14] :
    • Compare management fees and other costs associated with the services offered.
    • Analyse the relationship between costs and results, taking into account the company's history.
  • Diversity of assets under management [14] :
    • Opt for a company that manages a diversified range of assets, thereby promoting a better spread of risk.
  • Current market conditions [14] :
    • Take into account the impact of market conditions, such as the COVID-19 pandemic, on the company's performance.

These criteria are used not only to assess a fund management company's ability to meet expectations in terms of returns and risk management, but also to assess the quality of its customer service and its financial stability.

Risks and benefits of a management company

The advantages and risks associated with a portfolio management company can be summarised as follows:

Advantages :

  • Performance and Expertise : Management companies have demonstrated their ability to outperform the major market indices, with an average annual return of 9.5% [9]. Their expertise contributes to better planning and decision-making [19].
  • Community involvement : Active involvement in local community initiatives, such as supporting charities and educational institutions, enhances their reputation and social responsibility. [9].
  • Tax protection and optimisation: Management companies offer structures that protect assets from creditors and save tax through strategies such as dividend reinvestment. [21].

Risks :

  • Resource management : Uneven distribution of resources can lead to inefficient management, thereby compromising investment objectives. [19].
  • Complexity and costs : Setting up and managing a management company can be costly and complex, requiring particular care to avoid negative tax implications. [21].
  • Adaptability to small businesses : Portfolio management may not be suitable for small companies due to its complexity and the need for significant resources. [19].

Investors should take these factors into account when selecting a management company, carefully weighing up the benefits against the potential risks.

Conclusion

Over the course of this article, we have explored in depth the nature and crucial role of asset management companies in today's financial landscape. We have emphasised the importance of selecting the right management company for individual needs, given the range of services on offer, from individual to collective management, as well as discretionary management. The ability of these companies to align investment strategies with clients' specific objectives, while effectively managing risk, brings undeniable added value to investors' portfolios.

With this in mind, allow us to introduce you to our company, Ravel Finance, an award-winning portfolio management firm distinguished by its commitment to excellence and its ability to deliver outstanding results. We are committed to helping our clients achieve their financial goals through a personalised and innovative approach to portfolio management. With de Ravel Finance, benefit from recognised expertise and a reliable partnership to successfully navigate the complexities of the financial market.

FAQs

How does a portfolio management company work?

The main objective of a portfolio management company is to increase its clients' funds by aligning investments with their financial objectives and risk tolerance. This optimisation of investments is achieved in exchange for remuneration, often in the form of a management fee.

What is a portfolio company?

A holding company is an entity that does not directly produce goods or services. Its main function is to own the assets of other operating companies, usually in the form of investments.

What is the main business of portfolio management companies?

Portfolio management companies specialise in managing collective investments, in particular undertakings for collective investment in transferable securities (UCITS) and alternative investment funds (AIFs). Their business is strictly regulated and aims to manage collective investments efficiently.

What role does a management company play?

Asset management companies play a crucial role in financing companies at various stages of their development. They can provide funds for a company's start-up (venture capital), support its development (expansion capital), finance the transfer of the company or even the acquisition of listed or unlisted companies.

References

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[2] – https://fastercapital.com/fr/startup-sujet/Introduction-a-la-gestion-du-portefeuille.html
[3] – https://www.axiocap.com/blog/societes-gestion-portefeuille
[4] – https://www.mifassur.com/dossier-assurance-vie/definition-societe-gestion
[5] – https://funds360.fefundinfo.com/education/glossaire-des-opcvm/definition/societe-de-gestion-de-portefeuille
[6] – https://www.journaldunet.fr/patrimoine/guide-des-finances-personnelles/1502463-societe-de-gestion-definition-role-et-agrement/
[7] – https://www.capital.fr/votre-argent/gestion-de-portefeuille-1337065
[8] – https://www.cafedelabourse.com/actualites/societe-gestion-portefeuille-presentation-meilleurs-fonds
[9] – https://www.cairn.info/ingenierie-financiere–9782100749782-page-271.htm
[10] – https://icebergtradingsystems.com/les-differents-types-de-gestion-de-portefeuille-gestion-conseillee-gestion-sous-mandat/
[11] – https://fastercapital.com/topics/conclusion-et-orientations-futures-pour-la-gestion-de-portefeuille.html
[12] – https://fastercapital.com/fr/startup-sujet/avantages-et-les-inconvenients-de-la-gestion.html
[13] – https://deravelfinance.com/fr/10-questions-a-se-poser-pour-choisir-une-societe-de-gestion-de-portefeuilles/
[14] – https://portail-scpi.fr/blog/scpi-comment-selectionner-une-bonne-societe-de-gestion/
[15] – https://www.amf-france.org/sites/institutionnel/files/contenu_simple/guide/guide_professionnel/S%2527informer%2520sur%2520%2520%2520creer%2520sa%2520societe%2520de%2520gestion%2520de%2520portefeuille.pdf
[16] – https://www.fonciere-magellan.com/sgp-societe-de-gestion-de-portefeuille
[17] – https://www.meilleurescpi.com/conseils/quest-ce-quune-societe-de-gestion-de-scpi/
[18] – https://www.planview.com/fr/resources/articles/what-is-strategic-portfolio-management/
[19] – https://blog.planview.com/fr/advantages-disadvantages-project-portfolio-management/
[20] – https://fr.planisware.com/ressources/contenu-editorial/6-avantages-d%E2%80%99une-solution-de-gestion-de-portefeuille-de-projets
[21] – https://www.scotiabank.com/ca/fr/particuliers/conseils-plus/articles-de-fonds/posts.qu-est-ce-qu-une-societe-de-portefeuille.html
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[23] – https://www.amazon.fr/Introduction-gestion-portefeuille-Patrick-Piget/dp/2717865446