What are the functions of a mutual fund asset management company(AMC)?

An asset management company (AMC) invests pooled funds from clients into a variety of securities and assets. A fund house decides when, where and how to invest this money. Its decisions will be in line with their stated investment goals. 

An asset management company (AMC) invests pooled funds from clients, putting the capital to work through different investments including stocks, bonds, real estate, etc. Along with high net worth individual portfolios, AMCs manage funds and pension plans, and to better serve smaller investors create pooled structures such as mutual funds, index funds, or exchange-traded funds.

 

Asset management companies are colloquially referred to as money managers or money management firms. Asset management companies that offer public mutual funds or exchange-traded funds are also known as investment companies or mutual fund companies. 

Functions of the Asset Management company are :

Asset Allocation- Mutual fund comes with a definite financial aim that helps the asset manager to shortlist and decide on which asset to invest in. For instance, many debt-oriented funds put no more than 20% of their assets under management inequities. Or a balanced fund may choose to invest only 60% of assets inequities. This asset allocation one of the crucial decisions a fund manager has to take.

Research and Analysis- Building portfolio rides on plenty of in-depth studies daily. Analysts study the market, micro, and macro-economic aspects and fund performances regularly, and pass the reports to the manager.

Portfolio Construction- An AMC will have a team of researchers and analysts who report their market findings and trends to the fund manager. Based on these findings and investment objectives, he chooses which securities to buy, sell, or whether to hold them.

Performance Review- Even with disclaimers in the fine print, an AMC faces a lot of flak from the investors and trustees, if it cannot justify its investment decisions. It must also send regular updates to investors on sales and purchases, NAV, portfolio details, etc.

AMCs range from personal money managers, handling high-net-worth individual accounts, to large investment companies sponsoring mutual funds. AMC managers are compensated via fees, usually a percentage of a client's assets under management.