What is AMC in mutual funds? AMC is a SEBI-registered company in relation to mutual funds that administers and supervises the activities of a mutual fund. An AMC’s main responsibility is to collect the funds of different investors and use them to purchase various kinds of securities, including bonds, equities, and other financial instruments.
The AMC full form is “Asset Management Company” in terms of the mutual fund industry in India.
In the mutual fund industry, asset management companies are essential because they manage investment portfolios, make strategic choices, guarantee regulatory compliance, and stay in contact with investors. Investors often decide on their choice of mutual funds based on the standing and performance history of the AMC managing the fund.
What is AMC in mutual fund And How It Works?
Let’s understand what AMC is in a mutual fund and how it works:
- Fund Management:
- The investment portfolio of the mutual fund is managed by the AMC. This involves choosing which securities to acquire and sell in order to achieve the declared investment goals of the fund.
- Investment Decisions:
- The AMC appoints fund managers to manage the funds. The AMC’s fund managers are in charge of choosing wise investments based on deep research and assessment. These choices attempt to manage risk according to the fund’s mandate while producing returns for the investors.
- Portfolio Bulding:
- AMCs build portfolios according to the investment strategy of the fund. AMC-managed mutual funds may have different investment goals for each fund, such as income, growth, or a mix of the two.
- Investor Relations:
- AMCs deal with investors and give them details about the mutual funds they manage. This includes disclosures, reports on performance, and changes to the strategy or structure of the fund.
- Fund Expenses:
- The mutual fund’s operational expenses are covered by the fees that AMCs charge for managing the fund. Expense ratios, which include management fees, administrative expenses, and other charges related to fund management, are examples of common fees.
- Compliance and Regulation:
- The financial institutions have established a regulatory framework that AMCs have to adhere to. They are responsible for abiding by rules created to protect the interests of investors, ensure transparency, and maintain the integrity of the financial sector.
- Distribution and Marketing:
- AMCs are in charge of marketing and distributing their mutual fund products. This means placing the money available for rights via a variety of distribution channels, including direct sales, distributors, and financial consultants.
- Performance Monitoring:
- Regulators and investors keep a close watch on the performance of mutual funds that AMCs manage. Delivering returns along with the fund’s goals and keeping investors informed about performance are the AMC’s duties.
- Risk Management:
- AMCs use strategies for risk management to reduce risks related to the securities that mutual funds invest in. To protect investors’ capital, this involves diversifying the portfolio and having in place risk controls.
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Structure of Asset Management Companies
The Unit Trust of India (UTI) was established by the Indian government in 1963. The SEBI Act of 1992 gave public-sector banks and institutions permission to establish mutual funds. Let’s look at the illustration below to learn more about AMC and how they operate within the Indian mutual fund industry.
Sponsor of a mutual fund
When it concerns mutual funds, the person or group in charge of founding and running the fund is known as the sponsor. The sponsor is the one who starts the fund’s formation, selects the asset management company (AMC) to manage the fund’s investments, and plays a major role in the setup and launch of the fund.
Trustee
The AMC that looks after a mutual fund’s assets is selected by the trustees. The person responsible for the protection of scheme assets is also appointed by the trustees. Ensuring the protection of investors’ interests is the trustee’s main objective.
Custodian
The Board of Trustees appoints custodians, who are SEBI-registered banks and other reputed financial organisations. They are in charge of keeping the securities that a mutual fund owns and protecting them.
Registrar and Transfer Agent
The AMC appoints the transfer registrar and agent (RTAs). The RTAs handle the processing of applications, unit allocation, fund redemption, and delivery of account statements, or SOAs, to unit holders. In addition, the R&T agents handle investor interactions, fund accounting, and other duties required for account maintenance and investor servicing.
- ICICI Prudential Mutual Fund
- HDFC Mutual Fund
- Nippon India Mutual Fund
- SBI Mutual Fund
- Kotak Mahindra Mutual Fund
- Aditya Birla Sun Life Mutual Fund
- Axis Mutual Fund
- UTI Mutual Fund
In conclusion, we have discussed in detail what is AMC in mutual fund. If you have any questions, please consult your financial advisor for more information.
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Disclaimer: The information given in this blog is solely for educational purposes. Please research your own before taking any decision.