Principles in Dutch Asset Management
Among the huge population of Dutch Asset Management firms who offer to provide better services, provide higher returns, maximize asset value and all other such statements, what should an investor ideally look for, in terms of the basic underlying philosophies of his asset management in the Netherlands in their day to day functions and activities. Some indicators of sound asset management principles in the Netherlands include:
- Risk Reward ratio Good practices in Dutch Asset Management in the Netherlands take only well considered and thoroughly researched risks that provide higher returns in the long term
- Adequate Diversification Investments spread over different asset classes, styles, regions, etc. are the easiest and the most fundamental methodology that good Dutch Asset Management should follow to significantly optimize risk reward ratio
- Understanding of Markets The hypothetical efficient market theory is based on an assumption that all conditions are always factored in an asset price. However, in practical scenarios, this has proven to be flawed, time and again. Therefore, sound asset management in the Netherlands seeks to exploit the flaws in pricing of assets in the market.
- Valuations Averaging Good Asset Managers make use of the particular phases of the cycle that the markets are in, at any given point of time, concerning valuations. Positions should ideally be taken on the mean reversion basis
- First Mover It is a well known fact that first movers achieve relatively high returns on new developments before such investments become general accepted and the higher returns fade out
- Long Term Investment offers Profitability Long horizons provide the right climate and opportunity to profit from illiquid investments, they normally offer a significant premium covering illiquidity in the form of higher returns
- Asset Management is both an Individual and a Collective Effort Good Asset Management firms employ highly qualified and experienced employees. Their Fund managers should be happy to take on responsibility and should have a diverse and complementary work environment. Fund Managers should continually hone their skills in flexibility and resilience. A good network in the industry is a very highly valued talent.
- The critical role of structured investment processes A good asset manager works on continuous improvement and innovation of their investment methodologies. Their management should have a discerning investment process fully embedded into the organization. A quality certification is highly desirable.
- The Value of Cost Awareness The net returns of an asset managed by a sound asset manager improves by minimizing the costs both in the investment pools and the organization and by increasing efficiency.
- Good governance Responsible investment
The risk return profile can be drastically improved by factoring in many non financial elements in the investment process, as per good practices of asset management in the Netherlands. To a good asset manager, responsible investment is a way to improve the investment portfolio’s risk-return profile and simultaneously contribute to the firm’s sustainable development. This is usually enabled in Dutch Asset Management by a strict focus on a prospective asset’s financial performance as well as them way in which companies deal with the theme of sustainability in profits and how the main asset manager deals with their clients.