Last Updated on September 27, 2023 by BFSLTeam BFSLTeam
As of April 12, 2022, 42 asset management companies (AMCs) managed at least a few assets in India. Moreover, in the last ten years, the AUM (assets under management) for the domestic mutual fund (MF) business has increased six times, reaching Rs. 38.2 trillion.
Asset management companies provide investors with various services and strive to help their clients build wealth by making strategic and diversified investments tailored to their needs.
However, let us see what an asset management company is or the meaning of an AMC. Why is it important? If you are interested in learning more about an asset management company’s meaning and how it works, we have everything you need right here!
Table of Content
What is an asset management company?
What is AMC full form in mutual funds? In a mutual fund, AMC’s full form denotes an asset management company (AMC). It is a company that invests the pooled funds of clients in securities that match the stated investment objectives. The AMC may be a stand-alone company or a subsidiary of a financial services firm.
The role of an AMC is to provide professional money management for individuals, pension plans, endowments, and other institutional investors.
The AMC invests funds in bonds, stocks, real estate, commodities, etc. Fund managers appointed by AMCs are responsible for making investment decisions and managing portfolios on behalf of their clients.
How does an AMC manage the funds?
Generally, investors invest in a portfolio that an AMC manages for them when they work with an AMC. AMC must make sure that an investor’s financial goal is achieved. AMC uses the following methods to achieve this:
1. Asset Allocation
Mutual funds’ unique investing objectives help the fund manager choose the assets in which to make investments. As an illustration, most equity-oriented funds manage a substantial amount of their assets in equity and other equity-related instruments.
2. Research and Analysis
Key elements of the portfolio development for the fund include research and performance analysis of the asset classes. The fund manager takes investment decisions based on the fund’s goals after receiving reports from experts who have analyzed the market and its trends.
3. Constructing the portfolio
A group of researchers and analysts working for an AMC notify the fund management pretty often of market trends and outcomes. Using these findings and the fund’s investment objectives as a guide, the fund manager chooses which assets to buy or sell.
In this manner, the portfolio is constructed based on the fund managers’ skills and knowledge.
4. Performance Evaluation
Unitholders are entitled to receive information from AMCs that directly relates to their keenness in mutual funds.
It is also compulsory for AMCs to update investors on sales and purchases, portfolio data, NAV, and other important information regularly. Simply put, AMCs have to safeguard the interests of participants in mutual funds.
How do AMCs function?
AMC selects the optimum asset utilisation strategy to maximise earnings for clients.
Every AMC is managed by a team of fund managers and operates on a mutual fund theme. The organisation does a complete market analysis to establish a financial goal and carefully examines each statistic.
When investors put their faith in a fund house, also known as an AMC, they anticipate getting the most out of the profit. They come in various shapes and are categorized as mutual funds, exchange-traded funds (ETFs), index funds, hedge funds, private equity, etc.
The clients comprise of retail investors, institutional investors, High-net-worth individuals (HNWIs), the private sector, governmental bodies, etc.
The AMC gathers the funds from the general public while considering various risks, such as market, industrial, political, etc. In accrodance with this, it invests in high-risk and low-risk securities, such as debt, equities, bonds, and pension funds.
They often receive a predetermined commission based on the client’s overall Assets Under Management. Asset under management meaning, i.e., AUM is the total volume of assets that the AMCs manage.
When choosing an AMC, investors must consider their investment objectives and risk tolerance. Investors must also compare fees and performance records before arriving at a decision.
Disclaimer: Investments in securities markets are subject to market risks, read all the related documents carefully before investing.
