ASSET MANAGEMENT COMPANY
An Asset Management company is an entity that takes the financial assets i.e. funds and money of investors, company, HNIs, or another AMC, and uses the assets to invest in companies that use those as a financial investment, operational investments, or any other investment in order to grow the investment. After which, the returns are entitled to the actual investor, and a small portion of the returns are held back as fees with the AMC. These are also commonly referred to as fund houses, money managers, or money management firms.
There can be a number of funds with different investment and financial goals by an AMC. These are run by fund managers who first set the financial and investment objective, evaluate the associated risk and reward profile, and then decide the investment strategy.
HOW DO AMC WORKS?
While investing funds in an AMC, investors are basically investing in funds managed by the AMC. The gains and returns of the funds are market-linked and hence depend on the performance of the funds. A well-managed fund has the capability and potential to deliver comparatively high returns. In exchange, the AMC would charge a nominal fee called a fund management fee. It is the primary source of revenue for the AMC and therefore A fund is expected to generate good and competitive returns in its industry to maximize the investor base and in turn the revenue.
While option a fund for investing, the market reputation of the AMC plays a significant role. Investors trust those funds which are managed by reputed and well-known AMCs. To strengthen its investor base and deliver good gains, an AMC does a number of things which include efficient asset allocation, assessment of performance and formulating an investment portfolio.
MERITS OF INVESTING THROUGH AN AMC
1. Access to various asset classes:
Access to various asset classes indicates that the AMC invests in asset classes that an individual will not be able to. For instance, an AMC can invest in hefty infrastructure projects such as a bridge or power plant. They give access to investment that is so large that an individual will not generally be able to reach.
2. Economies of scale:
Economies of scale are the cost advantages that an entity can gain from increasing the scale of the operation. With growing operations, the per-unit costs of operation are lower.
3. Specialized expertise:
Specialized expertise means the finance professionals with extensive experience which the AMC hires for managing investment in the best way possible. For instance, an AMC can hire various professionals and experts who specialize in certain asset classes, such as fixed income, real estate, sector-oriented among others.
FACTORS TO CONSIDER BEFORE OPTION FOR AN AMC
1. Past and AUM:
Investors must check the track record of the AMC and also the AUM (Asset Under Management) before opting an AMC. It is better if investors opt for an AMC with a large AUM that can handle the sudden redemption pressure of large investors.
2. Fund managers profile and credentials:
Investors must check the track record and credentials of the fund managers too along with their investment style. There are multiple mutual fund plans whose performance is dictated by the investment skill, style and strategy of the fund manager.
3. Go through the reviews:
Investors must talk to their peers and check if the past performance has been consistent and if there are any hindrances or grievances against the AMC.
4. The reputation of the AMC:
An AMC does not earn its goodwill and status in a day, it took years and decades to do so. For instance, an AMC gets a good reputation after performing consistently over 5 to 10 years.
TOP AMCs IN INDIA
1. SBI Funds Management Pvt Ltd:
It is a joint venture between the SBI and financial services company Amundi, which is a European AMC in France. It was launched in 1987.
- SBI Flexicap Fund
- SBI Small Cap Fund
- SBI Bluechip Fund
2. UTI Asset Management Company Limited:
It is a part of UTI (Unit Trust of India) and was registered with SEBI in 2003. It is promoted by SBI, Bank of Baroda, LIC, and PNB. It is one of the largest and oldest funds in India.
- UTI Mid Cap Fund
- UTI Flexicap Fund
- UTI Nifty Index Fund
3. ICICI Prudential AMC Ltd:
It is the largest AMC in the nation with an AUM of approx Rs. 3 lacs crore. It is a joint venture between ICICI Bank and Prudential Plc of the UK. It commences its operations in the year 1993.
- ICICI Prudential Bluechip Fund
- ICICI Prudential Technology Fund
- ICICI Prudential Balanced Advantage Fund