What is an Asset Management Company (AMC)? A Complete Overview

Every year, multiple mutual fund schemes are launched in the market. Additionally, many people invest in these funds. According to a report, individual investors account for 61% of the AUM (Assets Under Management). In comparison, HNIs own 33.67% of the AUM in mutual funds. But have you wondered who handles ₹74.41 trillion worth of Assets? That's where Asset Management Company (AMC) comes into play.

Through this blog, let us learn what is Asset management company, its role, how AMCs make money, its types, and much more.

Continue reading to learn who manages your investments in mutual funds and AIFs.

What is Asset Management Company (AMC)?

Asset Management Company (or AMC) is a financial institution responsible for managing your investments within mutual funds, private equity, venture capital, AIFs, etc. These AMCs are mostly buy-side firms that acquire, hold investments, and manage them on your behalf.

Think of it as a friend who always plans the trips. One person is in charge of planning everything, who does research the best places (assets) to visit and make decisions on everyone's behalf. Over here, it is AMC for investing.

The AMC ensures that the pooled investments are invested in the right set of assets, designed to meet the financial goals and mentioned objectives of the fund. It also applies to the question of what is AMC in mutual fund.

How Does an AMC Work?

Asset Management Companies (AMCs) manage pooled money on behalf of investors. They play a key role in several financial products like mutual funds, hedge funds, REITs (Real Estate Investment Trusts), and private equity funds.

While the products may differ, the core role of an AMC remains almost the same. They try to pool money from investors and manage it to generate returns.

Here's how an AMC typically works, step by step:

Crafting A Strategy

The AMC first researches the market and then invests. Here, the fund managers and analysts study sectors, economic trends, and individual assets (like stocks, bonds, or real estate). Based on this, they craft a well-thought-out strategy that aligns with the fund's goal (like growth, income, or stability).

Investing Investors' Pooled Money

With the launch of NFO, the AMC gets access to a large pool of funds from retail and institutional investors.

Invest Funds In Specific Assets

This pooled corpus is then invested in a diversified set of assets (such as equities, bonds, private equity, gold, or real estate) as per the strategy.

Managing Investors' Money

The AMC actively manages these investments by tracking performance, rebalancing the mix, and taking timely buy/sell decisions. It all depends on the research and AMC's market outlook.

At this point, the AMC acts like a pilot who is constantly adjusting the flight path to ensure a smooth and balanced journey.

Maintaining Transparency

AMCs regularly disclose fund performance, asset allocation, expense ratios, and changes in strategy to investors.

Most AMCs publish monthly or quarterly fact sheets, audited reports, and daily Net Asset Values (NAVs) for mutual funds.

These AMCs are registered and regulated by the Securities and Exchange Board of India (SEBI). Hence, there is enough transparency when diversifying investments.

Reviewing And Balancing The Portfolio

Lastly, Asset Management Company also attempts to keep the investments in line with the portfolio's performance. They may review the asset allocation, rebalance, and adjust for the distribution made.

How Do AMCs Make Money?

Asset Management Companies (AMCs) generate revenue from certain applicable services. For example;

Management Fees

A fixed fee is charged for managing your investments. This fee is usually a percentage of Assets Under Management (AUM).

Performance Fees

In some cases, the AMC may charge performance fees if the fund outperforms the benchmark. It is mostly applicable in portfolio management services (PMS) or hedge funds.

Types Of Asset Management Company (AMC)

AMCs can come in different structures and forms. Let us explore the types of asset management company include;

• Hedge funds
• Mutual funds
• ReITs
• Index funds
• Private equity funds
• Exchange-traded funds
• Other funds

Pros And Cons Of AMCs

Considering the role of different types of asset management companies, they do have certain pros and cons:

Pros	Cons
Skilled fund managers bring in professional management.	AMCs may charge high fees irrespective of fund performance.
AMCs ensure diversification of investments into different asset classes.	Investors may not have the desired control and flexibility over their investments.
Lower costs and access to high-quality assets through large-scale operations.	If the fund manager mishandles the portfolio, the resulting impact is visible on the returns.

Final Thoughts

Asset Management Companies (AMCs) act as financial beings who manage investments on your behalf—whether it's through mutual funds, ETFs, REITs, or other structured products. From pooling funds, active management, to rebalancing, the AMC managers ensure the fund matches its objectives.

If you're looking to diversify your wealth without diving deep into daily market moves, a reputed AMC can turn complexity into clarity.

Disclaimer: The information provided in this article is for educational and informational purposes only. Any financial figures, calculations, or projections shared are solely intended to illustrate concepts and should not be construed as investment advice. All scenarios mentioned are hypothetical and are used only for explanatory purposes. The content is based on information obtained from credible and publicly available sources. We do not guarantee the completeness, accuracy, or reliability of the data presented. Any references to the performance of indices, stocks, or financial products are purely illustrative and do not represent actual or future results. Actual investor experience may vary. Investors are advised to carefully read the scheme/product offering information document before making any decisions. Readers are advised to consult with a certified financial advisor before making any investment decisions. Neither the author nor the publishing entity shall be held responsible for any loss or liability arising from the use of this information.