What is the Difference Between AMCs and Mutual Funds?

If you’re interested or already invested in the mutual fund (MF) market, you’ve come across the term Asset Management Company (AMC). How are they different from MFs themselves? How are the two related?

Often, asset management companies are informally referred to as money management firms that help investors build a portfolio. How? By pooling funds from several institutions as well as individual investors and investing them in capital assets that include bonds, stocks, hedge funds, pension funds and most importantly - MFs. To do so, these firms hire a set of experts called fund managers.

The role of a fund manager in MFs

Fund managers are responsible for picking the right set of securities that go into building an MF scheme. They base this selection on in-depth research and analysis of the market. They also make sure to comply with all the regulatory authorities while choosing the securities for a scheme.

For instance, a fund manager ensures that a debt fund meets its objective of shielding the investor from high risks and ensuring stable returns. To achieve this, they predominantly build a debt fund by selecting government securities and bonds.

On the other hand, if the mandate is to maximise returns, fund managers build an equity fund that mainly invests in stocks.

Additional Read: Importance of Mutual Funds

How does an AMC help you invest in MFs?

The primary goal of an asset management firm is to work for the benefit of it investors, which they do by matching MFs to your financial objectives. Here is how they do it:

Understand investment trends

Before researching the right picks for an MF with, asset management firms figure out the type of funds their investors may need. Doing this helps a fund manager decide the asset allocation within each MF. For example, investors want a moderate risk-return scenario. In such a case, the asset management firm can add balanced funds to the MF portfolio that invest in an amalgam of fixed income securities and stocks. A fund manager decides the asset allocation within that balanced fund.

Research, buy and sell the best securities

Picking the right securities for mutual funds requires expert research and analysis. Asset management firms have a team of financial researchers who continuously study the micro and macro-economic trends of the market and share the same with the fund manager. The manager reviews these reports and decides on the right securities to fill up a pre-specified MF with.

Report to investors

When you invest in a scheme through an asset management firm, it is entitled to update you on present NAVs and other portfolio-related details. You can request them to produce detailed data on a particular fund or report any grievance you may have.

Additional Read: Mutual Fund Fact Sheet: Key Information It Holds

In the end

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