The working of Asset Management Companies in India


In India, Asset Management Companies handle the whole affairs of mutual funds.

Asset management company pools funds from the investors and invests it in wide range of securities

Mutual fund investments are an ideal choice for people who look forward for financial independence. The ease of investing and professional fund management enhanced the popularity of this investment instrument in recent years. In this investment option, Asset Management Companies (AMC) invests the money gathered from different investors in a wide range of securities to earn returns based on the goal of the fund. An Asset Management Company in India is approved by the SEBI and functions under the rules and regulations of it. Before investing in mutual funds, get an idea about how asset management companies work in India for a deep understanding of mutual funds.

Asset Management Company (AMC)

If you are a mutual fund investor, you must have heard about the term Asset Management Company. These are companies that manage the mutual fund to make better returns for investors. If you invest in mutual funds, such companies invest that money in stocks, bonds, gold, real estate, and other different assets for specific financial goals. Referred to as money management firms or money managers, these companies hire professionals to buy and sell funds to fulfill their financial objectives. Some of the popular asset management companies in India include the ICICI Prudential Mutual Fund, HDFC Mutual Fund, Reliance Mutual Fund, and SBI Mutual Fund.

How Asset Management Companies work in India

In India, Asset Management Companies handle the whole affairs of mutual funds. They help investors by providing exceptional investing options and more diversification to fulfill their financial objectives. Let’s check how mutual fund companies work in India.

Raise money through NFO

The main job of AMC is to raise money from investors for the mutual fund scheme, and they collect it through a process named New Fund Offer (NFO). Each Asset Management Company needs to seek permission from SEBI to initiate this process to collect money from investors. In order to get this permission, they need to submit the required documents such as Key Information Memorandum (KIM) and the Scheme Information Document (SID) to SEBI. The schemes for raising money can be open-ended or close-ended, and the New Fund Offers are open usually for 15 days. Investors who choose close-ended schemes can invest their money only during this period.

Investors cannot invest or redeem their money for closed-ended funds once the NFO period is over, and they can redeem it once the scheme is matured. However, you can invest and redeem the money even after the NFO period if you choose an open-ended scheme. AMC informs about the NFO to the general public through the Scheme Information document once it is approved by SEBI. You can find many important details in this document, such as the investment objectives, nature of securities, the minimum amount required to invest, the tax liability of the scheme, exit load, and many other details. AMC raise money from investors and deploy that in various financial securities like bonds, stocks, money market instruments, and Government securities based on the investment goals of the scheme.

Other functions of Asset Management Companies

In addition to raise money from investors, Asset Management Companies performs many other functions as well. Following are the other functions of AMC.

  • Manage money

Managing the money collected from various investors to reach their financial goals is another important function of Asset Management companies. They appoint efficient fund managers to choose different asset classes like stocks, shares, securities, or equities to invest the money. They evaluate different metrics like market risks and then make the right investment decisions like how, where, and when investing the money to make returns.

  • Create perfect portfolio

The asset management company that you choose invests the money pooled from different investors in various asset classes based on their financial objectives. They help you to purchase the perfect portfolio that helps you to build wealth and fulfill your financial goals.

  • Asset allocation

Asset Management companies help you to get the right asset allocation for their investors. In fact, the performance of your investment mainly depends on its asset allocation. Since each mutual fund available in India comes with a theme or specific financial goal, it is easy for fund managers of asset management companies to determine the asset they need to invest for better returns.

  • Research and Analysis

An asset management company cannot function well unless they study the market and analyze the fund performances regularly. It helps fund managers to make the right decisions on investment and rise above their peers.

  • Other functions of AMC
  1. Submit quarterly reports to the trustees
  2. They ensure the mutual funds comply with the regulations of SEBI.

In India, fund managers implement the investment strategy of a fund and manage the trading activities of its portfolio to make higher returns for its investors. As an investor, you must choose the best AMC to invest your money based on its performance and track record. It is wise to check the performance history of the Asset Management Company that you intend to choose in order to get an idea about how they managed the money during the ups and downs of the market. Always choose an AMC that charges a fee for their services rather than commission.

That’s why Comparte Investment team asks do you have “Nivesh Ki Aadat”.

With this one can say “Mutual Fund Sahi hai”, so let me do Nivesh