Finals

Asset Management
Key Aspects of Asset Management
Type of Investment
Objective of Investment
Investment Banking and its four areas
Revenue in Investment Banking
Risk in Investment Banking
 Asset Management
Asset management refers to the professional management of
investments, such as stocks, bonds, real estate, and other
assets, on behalf of individuals, institutions, or entities, to
achieve specific financial goals.
Asset managers, often in the form of asset management
companies or firms, provide services that include the
selection, purchase, and sale of various securities and other
assets, as well as portfolio monitoring and financial planning.
Asset management is
managing money with two
goals of: growing
investor’s money through
investment and mitigating
risk.
 Key Aspects of Asset Management
1. Investment Planning: Asset managers assess the financial
goals, risk tolerance, and investment horizon of their
clients. Based on this analysis, they create tailored
investment plans.
2. Diversification: Asset managers diversify their clients'
portfolios by investing in a mix of asset classes, industries,
and geographic regions. Diversification helps spread risk
and enhance potential returns.
3. Portfolio Construction: Asset managers construct
portfolios based on the client's objectives. This process
involves selecting individual stocks, bonds, mutual funds,
exchange-traded funds (ETFs), real estate, or other
investment instruments.

4. Active and Passive Management: Asset managers can

engage in active management, where they actively buy
and sell assets to outperform the market.
Active Management Passive Management
 Type of Investment
• Investors can use their money in investing either directly or
indirectly, they can start up their business or use their assets to
purchase real estate hoping that it will generate rental income
or selling it at a higher price in the future.
• The type of returns depends on the type of assets: real estate
can generate both rent and capital gains, stocks pay dividends,
bonds pay regular interest.
 Objective of Investment
1. Safety: Investing in
government bonds is safety
investment that generate fix
income of interest.
Safe Investment are also
found in money market that
includes Treasury bills,
certificate of deposits and
commercial paper
 Objective of investment
2. Income – government and
corporate bonds may generate
fix income. Income investor
may also buy stock investment
that will give good dividends in
the long-term.
 Objectives of Investment

3. Capital Growth- Stock market Example: Ayala Corp.

offer the most speculative type of Aboitiz Equity Ventures
investment but riskier. Alliance Global Group
Blue Chips are generally BDO Unibank
considered the best of the bunch
as many of them offer reasonable Bloomberry Resorts
safety, modest income from Corporation
dividends, and potential for capital
growth over the long term.
Growth stocks are for those who
can tolerate some ups and downs.
These are the fast-growing young
companies that may grow up to be
amazons. Or they might crash
spectacularly.
Companies experiencing growth
use profits to reinvest instead of
paying dividends
Dividend stars are established Top Dividend Paying Stocks
companies that may not grow in 2023
in leaps and bounds but pay Metrobank
steady dividends year after PLDT
year.
Puregold
Robinson Bank
Investment Banking
Investment banking organizes large transactions such as
mergers, initial public offering, financing research,
acquisition, wealth management, trading and sales, and
hedging.
They advice businesses and government on how to meet
their financial requirements which is their primary
objective.
Four Areas of Investment Banking
1. Capital Markets
2. Advisory
3. Trading and Brokerage
4. Asset Management
1. Capital Market: is a financial market which bring the buyer
and seller to trade stocks, bonds and currencies.
They entrepreneurs to grow their business as they
bring the borrowers and the savers in the capital market.
 2. Financial Advisory
2. Financial Advisory: they help
manage and process the raising
of capital in they funding activity.
They help clients to determine
their financial objectives, risk
tolerance, income, expenses
and assets.
They give advice that fit your
style, risk tolerance in
developing and adapting
investment strategy
 3. Trading and Brokerage
Investment banks differs Brokerage in trading
from brokerage firm enable an investor to buy
because investment and sell stocks on the
banking offers focuses on stock market and charges
building long term wealth fee for the services
of the company where as offered.
brokerage helps clients to
provide passive income.
 4. Asset Management
The function of Corporate institutional
investment bank in asset investor includes:
management involves the insurance company,
investing of funds of mutual funds, venture
corporate institutional capital funds, pension
investor to stocks, bonds, providers.
derivatives and other type
of investment
 Revenue of Investment Bank

They receive commission and fees in their services. They

also serve as asset manager of corporate funds.
Underwriting fees for arranging the selling transaction of
securities in behalf of the client.
Advisory fee for providing guidance in their portfolio
Risk Management in Investment Banking
Risk management is define as protecting the assets
against loss and strategies must be applied to prevent.
Two considerations in Bank Risk Management:
1. The occurrence of possible or probable risk in the based on the
investment strategy.
2. The cost in the bank for the negative occurrence .
Bank function on a daily basis and it is critical that strategy must be
properly manage.
Banks want to avoid any major loss for themselves and they also
want to prevent the losing of money of their clients.
Risk in Banking that must be manage:
1. Market Risk: is also known as macro risk. The loss is due to the
different variables or factors such as inflation risk, interest rate risk,
exchange rate.

2. External Risk Factor: it includes credit risk may may lead to defaults
on making payments or failure in paying the interest or repayment of
the principal. To avoid, the bank should grant loans to qualified
applicant with their rigorous assessment.
The Role of Investment Banks:
1. Underwriting
2. Merging and Acquisition
3. Merchant Banking
1. “Underwriting”: It is a process where bank raises capital for
their clients either corporation, government, or institution in
the form of stocks or debt instrument.

Three phases of underwriting activity:

a. Planning: it is important to identify the objective of
investment, and investors’ demand or expectations.
b. “Timing and Demand”:
current market condition
investors’ appetite on risk if the are
conservative or aggressive investors
experience of investors in the particular
type of investment
benchmark offering of an IPO with similar
industry of the same location and size who
offered the same
current news ether positive or negative
that affects investment
c. “Issue Structure”: is the last pahse of advisory
service.

identify the issue structure if it is international or

is it going to be domestic.
is the issue an institutional or a retail investors
 Types of underwriting commitment

1. “Firm Commitment”: The underwriter commit to buy the entire

issue at a certain price, failure to sell the entire issue, firm must
take full financial responsibility responsible for unsold shares.
2. “Best Efforts”: this is the most common form of commitment
although the underwriter commit to sell the full issue at the
agreed price, there is no financial responsibility to be impose.
3. “All-or-none” the deal is avoided unless the entire issue is sold
and the underwriter will not receive any compensation.
As underwriter ( any party, or They assess the degree of
member of financial risk business insurance.
institutions) that assumes They help to set fair
the risks in mortgages, borrowing for loans
insurance, loans or
investments. They help company to
raise capital they needed
They charge fees for
services offered in terms They help investors to a
commissions, interest or well informed decision
spread making
MERGING AND ACQUISITION
 Merger and Acquisition
It refers to the legal consolidation of separate entities
to combine their assets and create a new organization.
In acquisition, one company will absorb and purchase
the other into its operation.
The objective of merger and acquisition is to create a
new company that is stronger than having with their
own.
 Benefits of Merger and Acquisition
1. Better strategic decision making with combine expertise
and customer insights
2. Better ability to serve existing ones with its new
geographic market
3. To attract top talent and skills has a greater opportunity
4. Development and launching of new product is better
5. Market position becomes better
 Difference between merger and acquisition
Merger Acquisition

Two separate entities combine forces It is sometimes called as takeovers

to create a new one. It exist when a company take over all the
management decision of a company
New management and new structure.
It requires a large amount of cash and the
Intended to reduce operational cost, power of the buyer is absolute
expand into new market and boost They acquire and intend to purchase their
profit supplier to improve economies of scale
As CEO’s decide to give up authority, They acquire to have the technologies of
new stocks is issued for the new the other company and help them
minimize the investment cost and
business research and development.
 Bank merging in the Philippines

Bank of Philippine Islands and

Far East Bank and Trust
Company in 2000
Banco de Oro and Equitable
PCI Bank in 2007
Philippine National Bank and
Allied Banking Corporation in
2012
 Merchant Banking
It provides services to their clients considering their financial
needs.
They render services on financial advising, and loan services
to corporations.
They issue letter of credits, transfer fund internationally,
consult in trade.
They offer the same services as investment bank
Ex. J.P. Morgan, Golden Sachs, Citigroup
 Difference Between merchant and
Investment Bank

Merchant Bank Investment Bank

They offer financial services to small- They focus on selling securities

scale clients that may not big enough (IPO) and financial advising
to attract venture capitalist. Their clientele are big
They take ownership to small companies that has sufficient
fund to finance the sale of
companies but has potential for
securities to the public.
growth.
Focuses on advising
Focuses on international financing: acquisitions and merger,
trade finance, foreign corporate raising funds for corporations
investment, foreign real estate and government
investment
 Merchant Bank

- They specialize in providing

special services to special
clients and private
corporations unlike
commercial banks.
- It is a non-depository
financial institutions
- They provide fundraising to
corporations, loan services,
financial advising, private
equity.
 Functions of Merchant Bank
Financing and Loans International Transactions
-they perform underwriting - They finance multinational
services in real estate, trade in different countries and
finance, and foreign investment. manage currency
- They may also issue letter of exchanges.
credit. - They help company who
- They help corporations in the make purchase in foreign
issuance of securities through country as merchant bank
private placements. issue letter of credit to make
a purchase.
It is a document sent from a
bank or financial institution
guaranteeing a seller will receive
payments from a buyer on time
and at full amount.

It is often use in the international

industry
Banks collects fee for issuing
letter of credit.
Finals Examination