Difference Between Private Equity and Asset Management Explained in Simple Steps

What is Asset Management?

What is a Private Equity Firm?

What is the Difference Between Asset Management and Private Equity?

Though in most cases, private equity vs asset management seems similar, they significantly differ in their methods of operations.

Parameters Asset Management Private Equity
Investment timeframe Invests for a comparatively shorter timeframe These firms usually invest for a longer timeframe, i.e. for a period of 3 to 10 years.
Caters to They deliver value to large and small organisations, insurance companies, pension fund organisations, government institutions, and high-net-worth individuals. They usually cater to struggling companies.
Focuses on An asset management company usually focuses on the personal finance of its clients. A private equity firm focuses mainly on the investments made by its clients.
Investments made by them They never make investments primarily but do it on behalf of their clients. They make investments in companies as primary investors.
Stated goal Helps the clients in achieving asset appreciation. Acquires capital from wealthy investors and provides them with a profit within the mentioned timeframe.
Flexibility An asset manager is usually liable to hold on to an asset for between three and six months. As they manage their assets directly, they are more flexible about when they can exit their investments.
Nature of investment Investments made under asset management are quite diversified. Investments made under private equity possess a higher level of control.

How Does an Asset Management Company Work?

What is the Fee Structure of Asset Management Professionals?

The fees associated with the asset management include the listed in the table below:

Type of Asset Management Asset Management Fees
Active Investment Management Fees A fund manager charges these fees to the investor for managing their assets in an investment portfolio.
Passive Management Fees These fees are charged to any investment vehicle, whether an actively managed mutual fund or an index fund. They can be charged as an Assets Under Management (AUM) fee or a Management Expense Ratio (MER) fee.
Brokerage Fees An investment broker charges these fees as a percentage of the net purchase amount. Thus, the fee varies depending on the broker and the type of services they provide.

How Does a Private Equity Firm Work?

What is the Fee Structure of a Private Equity Firm?

The fee structure of a private equity firm generally depends upon the General Partner’s previous performance. Furthermore, the fee structure is divided into performance and management fees, both of which are discussed hereunder:

Activity Fees
Performance Fees The exact nature of these fees is outlined in the initial investment memorandum. It completely depends on how the investment works. Usually, the fee involves 5% of the profit returned to the investors, and the rest is divided between the GP and the investors.
Management Fees These fees range from 0.5% to 3%, depending on the private equity fund size. They usually cover the firm's operational expenses.

Asset Management vs Private Equity: Which is Better for Whom?

FAQs about Private Equity vs Asset Management

Is it possible to go into private equity from asset management?

Yes, it is possible for one to go into private equity investment from asset management. This is because private equity is nothing but one of the investment strategies utilised in asset management for growing and managing the resources and assets of their clients.

What are the similarities between private equity and asset management?


The similarities between private equity and asset management are as follows:

  • Both of them aim to make returns on their investments
  • Both focus on managing investments
  • They both make investments to make huge profits for their clients.

Does asset management mean the same as private equity?

Though both private equity and asset management are methods of growing the financial portfolio of a client, the former is actually a type of asset management. In fact, asset management, being a broad term, encompasses various strategies that ensure significant growth in the portfolio of their clients.

What are the four tools of asset management?


The four tools of asset management are as follows:

  1. Reliability-based monitoring and analysis
  2. Time-based monitoring and analysis
  3. Condition-based monitoring and analysis
  4. Predictive monitoring and analysis

What's the difference between private equity and hedge funds?

Private equity invests in private companies for long-term growth, focusing on operational improvements. On the other hand, hedge funds trade publicly traded securities for short-term gains, using various strategies to generate returns.

Who is the largest private equity firm?

Kedaara Capital is India's largest private equity firm as of April 2024.

What does an asset manager do in private equity?

An asset manager in private equity oversees portfolio companies, implements strategic improvements, monitors performance, manages risks, and works on value-creation initiatives to maximise investment returns for investors.

Is asset management suitable for short-term investors?

Since asset management provides more flexibility and liquidity, it is suitable for all types of investors, be it short or long-term.

What makes Private Equity a long-term investment strategy?

Private Equity involves investing in companies over extended periods, enabling strategic adjustments and value enhancement prior to realizing profits.

Which investment avenue typically promises greater potential returns: Asset Management or Private Equity?

Private Equity frequently presents greater potential returns compared to Asset Management. However, it also entails higher risks and longer investment durations.