Asset Management Companies (AMC)

As mutual funds are growing in popularity, asset management companies have become pivotal in the financial market. These companies collect investors' funds and invest the pool in diversified portfolios across equities, debts, and other asset classes.

Simply put, AMC companies in India manage the funds of individuals and companies. They invest funds pooled from individual investors in various securities to generate optimal returns.

An asset management company helps investors to invest in diversified portfolios ranging from high to low in the risk spectrum. They employ seasoned and experienced professionals to design investment schemes taking into consideration market risks, industry risks, return risks, and political risks to meet return targets on investment.

AMC companies in India invest pooled funds in different asset classes to meet the financial objectives of their clients. Like a debt fund will invest in low-risk government bonds, while an equity fund targets higher returns by investing in company stocks.

Working with several groups of investors allows AMCs to diversify portfolios, efficiently mitigate risk, and access better capital appreciation. An AMC should efficiently identify the best investment options for its clients according to their investment criteria and risk appetite. Their primary purpose is to buy smart investment options that will increase the overall investment value of participating investors. They are the buyers in the financial market, which separates them from the other players in the domain like the investment banks, brokerages and insurance companies, who engage in selling funds in the market.

According to a list available in AMFI, there are forty asset management companies of various sizes registered in India. Recently, the popularity of AMC mutual funds increased significantly which boosted the total asset under management or AUM of these companies. The AMC companies in India recorded 5x growth in total AUM from February 2012 to February 2022.

Here we have discussed how these companies function so you can make an informed decision.

An asset management company manages the funds of its investors against fees. So basically, when you invest in AMC mutual funds, you invest in a portfolio offered by the AMC company.

The AMC company invests the corpus in different securities to generate returns matching the objective of the fund. The AMC company accomplishes the task by adopting the following measures.

Market research

AMC companies in India depend heavily on market research to study current trends, macro and micro economic factors, and political aspects to select investment securities. They also dive deep into the investment requirements of investors and personal finance needs to design investment schemes.

AMC mutual funds engage the services of fund managers and research teams to choose the best investment options from the market.

Asset allocation

An important role of an asset management company is to allocate the asset to various asset groups. The company will distribute the capital depending on whether the scheme is a debt or an equity fund.

Creating portfolios

Depending on the market findings and theme of the fund, the fund manager creates portfolios of securities. In the case of AMC mutual funds, the asset managers make decisions on which securities to purchase or sell, backed by the research done by the internal team.

Tracking performance

Monitoring portfolio performance is one of the primary roles of fund managers.

Asset managers provide regular updates on the fund's performance with regards to buys and sell, repurchases, NAV, return on risk, and portfolio changes which will impact the performance of your investor.

The role of Asset Management Companies in India

The AMC companies perform the role of mediators. Their primary task is to invest funds collected from investors into different securities to generate returns. The profit earned gets distributed among all investors. The AMC mutual funds operate in a regulated market which helps maintain a high degree of transparency and authenticity. It makes mutual fund investment a safe option for small investors.

Investing in mutual funds offers several benefits.

• Access to a diversified investment portfolio. The fund deposited is invested in various securities.
• It allows investors to earn decent returns without directly participating in the market.
• Investors can enter or exit at their convenience.
• One doesn’t have to open special accounts to invest in AMC mutual funds.

Final words

All asset management companies in India are regulated by AMFI and need to follow government guidelines to invest in the market, which makes AMC companies safe for investing. Over the years, mutual funds have emerged as an excellent investment option with flexible investment options, compounding returns, and rupee cost averaging.