Asset management company AMCs pool investments from individual and institutional investors and invest in capital assets. The AMCs identify the investment opportunities based on an investor’s objective and aim to optimize the return on investment.
What is an Asset Management Company?
An Asset Management Company is a firm that pools the funds from its clients and invests the same into a variety of securities and assets. Such investments include assets such as stocks, bonds, etc. In order to manage these funds, the asset management company appoints professionals called fund managers who look after the overall investment decision related to the pooled money.
Fund Managers are highly qualified people who have extensive and rich experience in the field of stock markets and investments. They ensure whether the investments are made as per the objectives of the investors and take suitable investment opportunities in the ever-changing market. Needless to say, the ultimate outcome of their investment is to make profitable investments.
In order to make a profitable return on the investment, factors such as market risk, current economic situation, and industrial analysis play a pivotal role. For example, debt-fund invests in risk-free government bonds to maintain minimum risk.
How Does an Asset Management Company Work?
The Asset Management Company is that part of the mutual fund that looks after its operations and investments. The formation of the AMC requires appropriate approvals by SEBI. When the investor invests in an AMC, they are actually purchasing a portfolio of assets that are being offered by the AMC. Post this, it is the decision of the fund manager who has to look after the investment decision and whether or not the investments made will be beneficial to the investors.
When it comes to selecting a fund for investment, investors prefer the funds which are managed by well-known AMC’s. Thus it is important to evaluate the market reputation of the AMC.
Below is a list of the steps which an AMC takes:
In order to maintain the investor’s trust and confidence, the AMC has to carefully make the investment in various equity and debt instruments. However, the timing of buying or selling depends on the decision of the fund manager who manages the funds and allocates the pooled amount in various asset classes.
Research and Portfolio construction
This is perhaps the most crucial decision which is done by the AMC. It takes ample time and investment to make thorough market research and create a portfolio based on the prevalent market situations and economic factors. A Fund Manager, along with his or her team of analysts, makes its market analysis and arrives at a conclusion. Fund manager’s aim to make a balanced portfolio that should be able to perform even in the worst of the time. Considering the risk factors associated with each asset class, a portfolio is constructed.
The AMC’s have to answer to investors for the investments made by them. In order to avoid a bad reputation and criticism from investors, it becomes important to carefully assess the performance of the fund on a periodic basis considering factors like NAV, fund returns, etc.
Points to remember before choosing an AMC
It is important for investors to carefully evaluate the track record of the AMC. Even though the AMC’s are required to make the investments as per the investment objective, it is prudent for the investors to keep track of the news related to the AMC. This can include a change in the fund manager, returns of the scheme managed by the fund, etc.
Below are a few points that the investors can consider while choosing an AMC:
Market reputation of the AMC
It takes time to create a market reputation under any market conditions. Consistent performance, frequent changes in the management, clean track record, etc. all go a long way in building the reputation of the organization.
As for the investors, it becomes important to keep a track of all the important information related to the AMC. Most of the details can be found on the company website.
Fund Manager is the person responsible for making an investment on behalf of the investors. They are market experts who have years of experience in the capital market. AMC’s out there would never want a less experienced professional to look after their investment decisions. Hence it becomes important to have a close track on the credentials and work experience of the fund manager.
The Reliability of AMC when compared to Banks
In today’s economic scenario and the ever-changing economic conditions, investors believe in more transparency when it comes to their investment decisions. For example, nowadays no one has to physically visit a bank branch in order to get their loan statement details or their interest certificate. Most of the services provided by banks can now be easily accessed offline. Banks are also under the regulatory control of RBI which keeps a close track on their workings.
When it comes to AMCs, most people are not unaware that AMC’s are appointed by the trustees in order to manage the pool of funds. These trustees are in turn regulated by SEBI. In this way, SEBI keeps a close track of the objectives and working of both. Hence as we can see, AMC’s are just as reliable with SEBI acting as the watchdog.
SEBI, AMFI and RBI Role in AMC Operations
SEBI: An AMC works under the supervision of the board of trustees which in turn are regulated by SEBI. SEBI ensures that both are working in the interest of the investors and complying with the guidelines laid down by it.
AMFI: AMFI was formed by mutual fund companies to address investor grievances. The main objective of AMFI is to ensure the development of the mutual fund industry and ensure that the functioning of the industry is along ethical lines. AMFI also aims to protect the interest of all unitholders.
RBI: RBI also plays an essential role in regulating AMCs, if a bank is one of the sponsors along with SEBI and AMFI.
SEBI, AMFI and RBI Guidelines Which An Investor Should Know
The following are some of the guidelines and practices mandated by SEBI, AMFI, and RBI for mutual fund companies:
An AMC shall not act as a trustee of any mutual fund
- An AMC shall not act as a trustee of any mutual fund
- The net worth of an AMC should not be less than Rs. 10 crores.
- The chairman of the AMC should not hold the position of trustee of any mutual fund company
- The company shall not invest in any of its schemes. The company can invest only on the full disclosure of its intention to invest in the offer documents.
- The key personnel must have a clean track record.
Some of the Best Asset Management Companies in India
|AMC||Few Mutual Fund||AUM as on Dec-31-2019||Few Fund Managers|
|Invesco Asset Management (India) Private Ltd||Invesco India Tax Plan, Invesco India Gilt Fund, Invesco India Credit Risk Fund,Invesco India Growth Opportunities Fund, Invesco India Midcap Fund.||Rs. 39,200.18 crores||Mr. Taher Badshah Mr. Amit Ganatra Mr. Pranav Gokhale Mr. Neelesh Dhamnaskar Mr. Sujoy Kumar Das Mr. Krishna CheemalapatiMr. Taher Badshah Mr. Amit Ganatra Mr. Pranav Gokhale Mr. Neelesh Dhamnaskar Mr. Sujoy Kumar Das Mr. Krishna Cheemalapati|
|Mirae Asset Global Inv (India) Private. Ltd.||Mirae Asset Tax Saver Fund, Mirae Asset Hybrid – Equity Fund, Mirae Asset Emerging Bluechip Fund, Mirae Asset Large Cap Fund,Mirae Asset Midcap Fund, Mirae Asset Short Term Fund, Mirae Asset Dynamic Bond Fund.||Rs. 44,373 Crore||Mr. Neelesh Surana Mr. Gaurav Misra Mr. Harshad Borawake Mr. Mahendra Jajoo Mr. Vrijesh Kasera|
|Axis Asset Management Company Limited||Axis Equity Saver Fund Axis Triple Advantage Fund Axis Liquid Fund Axis Small Cap Fund Axis Long Term Equity Fund||Rs. 1.23 lakh crore||Mr. Jinesh Gopani Mr. R Sivakumar Mr. Viresh Joshi Mr. Aditya Pagaria Mr. Dhaval Patel|
|Kotak Mahindra Asset Management Company Limited||Kotak Savings Fund (G) Kotak Standard Multicap Fund (G) Kotak Taxsaver Fund Kotak Small Cap Fund Kotak Emerging Equity Scheme||Rs. 1.76 lakh crore||Mr. Hiten Shah Mr. Devender Singhal Mr. Harsha Upadhyaya Mr. Pankaj Tibrewal Ms. Shibani Sircar Kurian|
|Motilal Oswal Asset Management Company Limited||Motilal Oswal Long Term Equity Fund Motilal Oswal Focused 25 Fund Motilal Oswal Midcap 30 Fund Motilal Oswal Multicap 35 Fund Motilal Oswal Large and Midcap Fund Motilal Oswal Liquid Fund||Rs. 20281.49 crore||Mr. Akash Singhania Mr. Aditya Khemani Mr. Siddharth Bothra Mr. Herin Visaria Mr. Niket Shah Mr. Swapnil Mayekar Mr. Abhiroop Mukherjee|
|Tata Asset Management Limited||Tata Balanced Fund Tata Equity P/E Fund Tata Treasury Advantage Fund Tata Liquid Fund Regular Growth||Rs. 52,677.67 crore||Mr. Rahul Singh Mr. Chandraprakash Padiyar Mr. Sonam H Udasi Mr. Rupesh Patel Mr. Sailesh Jain Mr. Amey Sathe Ms. Ennette Fernandes Ms. Meeta Shetty Mr. Abhinav Sharma Mr. Satish Mishra Mr. Murthy Nagarajan Mr. Abhishek Sonthalia|