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What is an Asset Management Company (AMC)? A Guide for India

Asset Management Company (AMC)
Asset Management Company (AMC)

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:

Asset Allocation

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.

Performance Review

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

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 & 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 & 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
  • 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

AMCFew Mutual FundAUM as on Dec-31-2019Few Fund Managers
Invesco Asset Management (India) Private LtdInvesco 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 croresMr. 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 CroreMr. Neelesh Surana
Mr. Gaurav Misra
Mr. Harshad Borawake
Mr. Mahendra Jajoo
Mr. Vrijesh Kasera
Axis Asset Management Company LimitedAxis Equity Saver Fund
Axis Triple Advantage Fund
Axis Liquid Fund
Axis Small Cap Fund
Axis Long Term Equity Fund
Rs. 1.23 lakh croreMr. Jinesh Gopani
Mr. R Sivakumar
Mr. Viresh Joshi
Mr. Aditya Pagaria
Mr. Dhaval Patel
Kotak Mahindra Asset Management Company LimitedKotak Savings Fund (G)
Kotak Standard Multicap Fund (G)
Kotak Taxsaver Fund
Kotak Small Cap Fund
Kotak Emerging Equity Scheme
Rs. 1.76 lakh croreMr. Hiten Shah
Mr. Devender Singhal
Mr. Harsha Upadhyaya
Mr. Pankaj Tibrewal
Ms. Shibani Sircar Kurian
Motilal Oswal Asset Management Company LimitedMotilal 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 croreMr. Akash Singhania
Mr. Aditya Khemani
Mr. Siddharth Bothra
Mr. Herin Visaria
Mr. Niket Shah
Mr. Swapnil Mayekar
Mr. Abhiroop Mukherjee
Tata Asset Management LimitedTata Balanced Fund
Tata Equity P/E Fund
Tata Treasury Advantage Fund
Tata Liquid Fund Regular Growth
Rs. 52,677.67 croreMr. 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

Frequently Asked Questions

What is the difference between an asset management company and a hedge fund?

An asset management company pools the investor’s money and invests in a collection of stocks and mutual funds which is managed by the fund manager. The fund manager is responsible for the overall growth of the portfolio and taking buy and sell decisions on the basis of prevailing market conditions.
Hedge funds operate in a similar fashion as a mutual fund but with fewer regulations than a mutual fund. As Hedge funds are not strongly regulated, they can prove to be very risky investments. However, hedge funds mostly work with high net worth clients.

Who regulates the asset management companies in India?

The Asset Management Company in India is run by the sponsors or trustees who in turn are regulated by SEBI. Furthermore, AMC’s are also passively regulated by the Association of Mutual Funds in India to protect the interest of the investors.

What is the role of an asset management company in India?

An AMC is the regulating body of a mutual fund. It oversees all the administrative, managerial and operating functions of the mutual fund. The brand name of AMC is dependent on the performance of the mutual fund schemes under its banner.

What does an asset management company do?

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.

Published on April 14, 2020