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What is the role of AMC in the Mutual Fund?

Punjab News Express | September 20, 2019 10:39 AM

Asset Management Company or better abbreviated as AMC is the group of people who manage the investments of the funds of a mutual fund. These are the people who are responsible for financial asset selection and also for the most important parameters for a mutual fund for investors, “the return”.

AMC is responsible for receiving funds from various clients and putting these funds to schemes to get better returns.

AMCs are responsible for the entire operation of the Mutual Fund. The objective starts right from making the financial goal for a fund, followed by selecting the asset class whether debt, equity or any other financial assets are to be included, followed by the selection of stocks, debt based bonds, real estate, etc. These are the people who are also responsible for monitoring, adjusting, rebalancing of portfolio and many such tactical moves a fund has to do for meeting its pre-decided investment goals.

Let’s understand this process more closely.

An AMC would appoint a fund manager for a mutual fund scheme. This means that under an AMC many Mutual Funds schemes can be present. Each and every mutual fund scheme under the  AMC will have a fund manager. This Fund manager will micro manage the mutual fund scheme whereas the AMC will manage all funds at a macro level.

Roles of Asset Management Company

We investor invest in an AMC, in accordance with the portfolio they offer with a defined investment rationale and philosophy. As mentioned, an appointed asset manager would make decisions and other tactical moves like re-balancing, selection to benefit the investors. In a broad sense they manage the portfolio by playing the following rules:

a) Research and Analysis

Portfolio construction requires in depth analysis of which asset class to pick depending on the prevailing market condition. Analysts in an AMC would conduct in-depth market analysis both from micro and macro level perspective.

b) Portfolio Construction

The portfolio construction is done by defining the investment objective or rationale. The main aim of a fund manager is to generate more returns than the benchmark. The fund managers would take the market findings of AMC’s analyst and would start crafting a fund scheme.

c) Asset Allocation

At this stage, the mutual fund objective is fixed. Now the asset has to be allocated based on the investment rationale, like for deb based fund not more than 20% to be allocated in equities, etc.

Post the broad asset class allocation, the process now boils down to selecting real assets like for equity based – growth fund, which all growth stocks to fit in large cap so that desired return can be achieved.

d) Performance Review

The AMC would continuously monitor the performance of the fund scheme. As it is essential to be a better performer than the competitors in the market.

e) Tactical Rebalancing

Markets are not stable at any instant of time, hence if a stock has been allotted say 10% of the fund and the stock is not performing well, there has to be a re-allocation of funds to a better performing stock. This is a very crucial process and this defines the expertise a fund manager has.

An AMC is under the supervision of the board of trustees. AMC’s are also regulated by the Securities and Exchange Board of India (SEBI). There is another regulating body for AMC called Association of Mutual Funds in India (AMFI). Every AMC has to comply with the rules and risk management guidelines set by both SEBI and AMFI.

Top AMCs in India

An Asset Management Company offers investors with different mutual fund schemes to invest. They manage the money received from the investors by investing in different asset classes. So how, should they be judged is the real question any investors may have?

Following are the parameters on which AMCs are generally rated upon:

a) Reputation of AMC

b) Fund Managers Credentials

c) Fees, Commission

d) Performance throughout the years

e) Asset under Management (AUM)

 Following is the list of top 10 Asset Management Companies in India

1) ICICI Prudential Mutual Fund

2) HDFC Mutual Fund

3) Reliance Mutual Fund

4) Aditya Birla Sun Life Mutual Fund

5) SBI Mutual Fund

6) UTI Mutual Fund

7) Kotak Mahindra Mutual Fund

8) Axis Mutual Fund

9) Franklin Templeton Mutual Fund

10) DSP Mutual fund.

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