What is AMC in Mutual Funds?

The evolution of the investment philosophy of Indian investors is evident in the growth of mutual funds in India. It is one of the modern financial instruments that gained significant attraction in recent years. A crucial force behind this attraction is the efficient management of AMCs in India. AMC full form in mutual funds is Asset Management Company, which is the originator of different schemes used for investment.

These are entities designing, managing and investing in different instruments to create a basket. They are also known as fund houses. Their role in the overall functioning of mutual funds is crucial.

What is AMC in Mutual Funds?

Asset Management companies or AMCs invest investor’s funds in different financial securities to generate potential returns. Usually, established entities like banks, financial institutions or brokerage function separately to design and create different mutual fund schemes. Apart from this, some other entities also function as AMC. 

In order to get the licence and register as an AMC, an entity needs to abide by the regulations established by the Securities Exchange Board of India and provide the required documents. As of December 15, 2024, there are 49 registered AMCs in India.

These organisations employ professional expertise to design the schemes and allocate the funds collected from investors through the registrar and transfer agents. Different schemes are created by the AMCs that cater to specific needs and categories of investment. Apart from mutual funds, other fund-based products, such as Alternative Investment Funds (AIFs), hedge funds, private equity, pension funds, etc., are managed by AMCs. 

Role of AMCs

As per the AMC full form in mutual funds, the functions of these organisations are not limited to asset management and have a wide scope, including the following activities:

• Research

Managing large funds in the universe of diverse investment instruments can be difficult. Therefore, it requires intense and consistent research to grab the market opportunities and make the maximum benefit for investors. This is facilitated by different technical and fundamental methods. Moreover, this activity helps them get a holistic view of investment and facilitates their purpose of investor education, communication, etc.

• Scheme Designing

The research helps AMCs understand the requirements and potential addressable markets among the investors. Moreover, it helps them understand the viability of an investment. Following this, suitable schemes are designed by the fund houses.  This scheme creation provides the desired exposure to different instruments to the investors. 

• Regulatory compliance

Due to growing investor exposure, there is a need for appropriate regulatory provisions to safeguard the investors. AMCs manage these compliances with due care with the help of disclaimers, investment details, regular statements and other regulatory tools.

• Fund Operations

Collecting investments from investors is facilitated by the RTAs. However, AMCs are liable for mobilising them into suitable assets, regularly monitoring their status, and transacting as per market and investor conditions. The AMCs collect revenue in exchange for these services in the form of Total Expense Ratio or TER. Moreover, their fund managers and distributor networks are crucial for investors to assess.

Factors to Consider While Selecting AMCs

Investing is a holistic process, and like other considerations, investors also need to remember certain factors while selecting the suitable AMC:

• Historical performance: The performance of schemes created by that particular AMC may not be a clear indication of future performance, but it can help investors understand the attitude of the fund manager and fund house.
• Fund manager: It is a qualitative factor and can significantly affect the allocation and management of investor’s funds
• Regulatory compliance: The news regarding regulatory history and the credibility risk of a particular AMC should be checked.
• Others: Some details, such as fund size, no. of schemes, their categories, expense, redemption policies, etc., may not have a significant effect but can be considered while comparing two or more AMCs.

Future of AMCs in India 

The growing population of India and its evolving investment attitude in the country make it a potential destination for attracting mutual funds investments. Some reports suggest that the asset management industry will experience one of the highest growth in the upcoming years, which can be nearly 25% for the next 10-20 years. It can further increase the no. of AMCs in the country, which will provide the desired options and diversification to the investors.

Conclusion

Understanding what is AMC in mutual funds is accompanied by deep-diving into its different aspects, such as functions, selection, future, etc. Some of the factors affecting AMC’s functioning can be the professional expertise of their team, the regulatory framework in the country, target customers, market scenarios, etc. However, selecting a suitable AMC can help investors navigate through the investment journey with ease.

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FAQs on What is AMC in Mutual Funds

1. How many AMCs are there in India?

Due to the rise of mutual funds in India, the number of mutual fund houses or AMCs has experienced a surge. As of December 15, 2024, 49 AMCs are registered with SEBI. Moreover, these AMCs launch multiple schemes in different categories and instruments. As of November 2024, there are 1666 active mutual fund schemes.

2. Why do we need AMCs in mutual fund investing?

The fund houses play a crucial role in designing specific schemes, managing investments and providing exposure to varied assets. They help investors in managing different assets in a single scheme by potentially minimising the cost of these investments. Moreover, their professional fund management reduces the efforts of investors in this process.

3. What is the role of a sponsor?

They are the key elements or founding fathers of an AMC. The idea of a particular AMC is the product of their efforts and ideas. However, they do not have controlling authority over its functioning. The sponsors can be banks, financial institutions, brokerage firms, etc.

4. What affects the functioning of AMCs?

There are multiple factors affecting the overall mutual fund’s investment and management process. Some of the factors affecting AMC’s functioning can be the professional expertise of their team, the regulatory framework in the country, target customers, market scenarios, etc.

5. What is the difference between AMFI and AMCs?

These are two famous terms in mutual funds and can be confused with each other. However, AMFI is the Association of Mutual Funds in India, which has different AMCs as its members, and as an association, it is liable for crucial publications, investor protection, etc.